Maryland is a great place to retire for many reasons, though it is less tax-friendly to retirees than neighboring states like Pennsylvania. Both states have warm summers and relatively mild winters and offer quality retirement communities and health care options. These states are also close to multiple metropolitan areas that are accessible by train and car, so family and loved ones can come and go with ease.
If you love Maryland’s coastal areas and access to museums and major cities, it can be a beautiful place to retire. If you want to explore a nearby option with similar benefits, lower living costs and more lenient tax laws for retirees, consider the beautiful Keystone State.
What to Consider When Choosing Your Retirement Location
It’s estimated that 23% of people in Maryland are over age 60, and that number is rising. It’s a popular retirement destination because it has a charming, small-town feel and is well-connected to busier areas. However, Maryland is reported as one of the seven most expensive states for retirement, so if affordability factors into deciding where you want to retire, it may not be the right place for you. If you love the landscape, Pennsylvania is known for its low living costs and offers a similar combination of scenic rural areas and lively central hubs.
Is Social Security Taxed in Maryland?
Railroad Retirement and Social Security benefits are not taxed in Maryland. This makes Maryland somewhat tax-friendly to retirees and works toward helping retirement income go further. However, Maryland is one of the only states that imposes both estate and inheritance tax, which may factor into your retirement plans.
Does Maryland Tax Pensions?
Maryland does tax pensions. Withdrawals from pensions and individual retirement accounts (IRAs) are taxed as regular income. The Maryland Pension Exclusion allows some eligible individuals to subtract up to $39,500 of their retirement annuity income and taxable pension from their federal adjusted gross income. This is available to you if you are over 65 years old, disabled or have a disabled spouse, meet other specific criteria and complete an exclusion worksheet.
Does Maryland Tax Military Retirement?
Yes, Maryland does tax military retirement. While military retirement pay is fully taxable in Maryland, some targeted deductions are available. Military retirees or spouses receiving military retirement income younger than 55 can subtract up to $12,500 from federal adjusted gross income before calculating tax. If you are older than 55, up to $20,000 can be subtracted before tax.
The exclusions and deductions available to military retirees in Maryland are advantageous, but it is important to consider that military retirement pay is completely tax-free in other states. For example, although some state income is taxed in the neighboring state of Pennsylvania, military pay is not.
What Is the Retirement Age in Maryland?
Like the rest of the United States, Maryland’s full retirement age for Social Security is 67. You can choose to activate your benefits as early as 62, but the monthly amount will be less due to the extended payout period.
The state system is different from how retirement is handled federally. Within the Maryland State Retirement and Pension System, individuals who have been in service for 10 years qualify for normal service retirement at age 65. However, individuals can retire earlier if their combined age and years of service are at least 90, for example, 57 years old and 33 years of service. The youngest age of retirement in Maryland is 55.
Weighing the Pros and Cons of Retiring in Maryland Compared to Neighboring States
While Maryland is a lovely place to retire for many reasons, some nearby states, like Pennsylvania, offer more benefits for retirees. For example, unlike in Maryland, military retirement pay is not taxed in Pennsylvania if the required years of service have been reached or you are of retirement age. Additionally, assets held in IRAs are not taxed, and pension income is tax-free if you are 60 years or older. Like Maryland, Social Security benefits are nontaxable in Pennsylvania, Delaware, Virginia and West Virginia.
If you would like to explore retirement in these states further, the welcoming retirement communities in Pennsylvania are particularly remarkable. For example, Cornwall Manor is a continuing care retirement community (CCRC) surrounded by natural beauty and historical sites. If you value independence, social engagement and an active lifestyle, the community, facilities and activities at Cornwall Manor are well worth exploring. Contact us online to learn more, schedule a tour and discover why Pennsylvania is a top retirement destination.
