What is it with retirees and Arizona? Maybe it’s the spectacular landscapes or the warm weather. Perhaps it’s the world-class healthcare and golf courses. It could also be the welcoming communities, low cost of living, and the tax-friendliness of the state. Or maybe it’s all the above that makes Arizona one of the country’s most popular destinations for retirees seeking a fulfilling lifestyle.
But before pulling up stakes and heading off to the Grand Canyon State, it’s essential to consider all factors, good and bad, about retiring in Arizona. Here’s what you need to know about retirement in Arizona.
Why Retire in Arizona?
Since the creation of the country’s first adult retirement community in Youngtown in 1954, Arizona has been a mecca for people with ambitions for a good life for the rest of their lives. Today, nearly 20% of the state’s 8 million residents are over 65, enjoying abundant sunshine, beautiful natural landscapes, and access to cultural, recreational, and healthcare resources catering to seniors.
Here are the key factors to weigh when considering Arizona as a retirement destination.
Climate
With more than 300 days of sunshine each year, one of Arizona’s main draws is its weather, with plenty of opportunities to enjoy outdoor activities and beautiful landscapes. While the dry summer heat can be extreme, particularly in cities like Phoenix and Tucson, the mild winters make it an ideal destination for retirees looking to escape the colder northern climates.
However, when it does rain, it literally pours. Arizona is notorious for its monsoon season, which can drop several inches of rain in a few weeks.
Regions such as Flagstaff and Prescott are located at higher elevations, so they experience dramatically lower summer temperatures, which may be more suitable if you’re looking for milder conditions. Both areas become winter playgrounds for those who enjoy skiing and other winter activities.
Scenic Beauty and Outdoor Recreation
Arizona is home to some of the most spectacular landscapes in the U.S. Natural wonders like the Grand Canyon, Sedona’s red rock formations, and the forests of northern Arizona provide retirees with plenty of opportunities for hiking, birdwatching, mountain biking, and simply spending time outdoors in a nature-centered lifestyle. And, with its nearly year-round sunshine and almost 400 courses, Arizona is a golfer’s paradise.
Cultural and Entertainment Opportunities
Whatever your cultural or entertainment preferences, Arizona probably has what you want. The larger cities of Phoenix and Tucson offer a wide range of artistic and entertainment activities, including museums, galleries, theaters, and concert venues.
Retirees can engage in the local community and culture at state and county fairs, and sports fans can enjoy year-round entertainment with professional football, baseball, and basketball teams. Arizona is also the temporary home to multiple baseball teams for spring training each year.
Retirement Communities
Arizona is a hotspot for retirement-friendly communities and active adult neighborhoods offering golf courses, fitness centers, and social clubs. Cities like Sun City, Green Valley, and Scottdale are full of 55+ communities, providing retirees with a built-in network of peers, social activities, and access to world-class healthcare services.
Important Financial Considerations
Here are a few financial elements to consider as you plan to retire in Arizona.
Cost of Living
The cost of living in Arizona is relatively moderate, below the national average, depending on location. Cities like Phoenix and Scottsdale can be more expensive, while other areas such as Tucson, Yuma, and Prescott tend to cost less. Overall, everyday expenses, such as groceries, transportation, and utilities, are lower in Arizona than in many other popular retirement destinations. However, you can expect to pay more for utilities during the hot summer months.
You’ll still find housing more affordable in Arizona than in states like California and New York. But, with Arizona’s robust housing market, home prices are rising in some parts of the state.
Housing Options
Retirees can choose from various housing options, including age-restricted communities, assisted living facilities, and individual homes—whatever meets their lifestyle and health needs. Cities like Sun City and Surprise offer active adult communities for seniors.
Healthcare
Healthcare is always an important consideration for retirees. Arizona offers a solid network of healthcare facilities, particularly in larger cities, including hospitals and medical centers. The world-renowned Mayo Clinic in Scottsdale is a significant draw, and health networks such as Banner Health and HonorHealth provide specialized care for seniors.
However, retirees choosing to live in more rural areas may find that healthcare is not as accessible or comprehensive. If you live in less populated parts of the state, you might have to account for longer travel times to see specialists or access certain medical services.
Taxes in Retirement
A top concern for most retirees is making their retirement nest egg go further on a fixed income—a big reason they’re attracted to Arizona’s tax-friendliness. Arizona is considered one of the more tax-friendly states for retirees primarily due to its relatively low-income tax rates. However, it’s essential also to consider other tax implications, such as sales, property, and estate taxes.
State Income Tax
Arizona’s state income tax rates are relatively moderate, ranging from 2.59% to 4.50%, which is below the national average and competitive with other states that are popular retirement destinations. Equally important, Arizona doesn’t tax Social Security benefits, a significant financial advantage for retirees who rely heavily on these payments to meet their living needs.
Arizona also offers tax exemptions for pension income. Public pension income for federal civil service or military retirement pay is exempt up to a certain amount. Income from private pensions and qualified retirement plans is taxed as ordinary income, though retirees benefit from Arizona’s relatively low tax rates.
Sales Tax
The statewide sales tax rate in Arizona is a reasonable 5.6%. However, when you factor in local taxes in some municipalities, the overall rate can climb as high as 11%. Though sales taxes do not apply to groceries or prescription drugs, you may face higher sales taxes on most everyday goods and services.
Property Taxes
Arizona’s higher sales tax is partly offset by its low property taxes. At approximately 0.62%, Arizona’s property tax rate is among the lowest in the U.S., benefiting retired homeowners, particularly those from higher-tax states like New Jersey or Illinois. Additionally, Arizona offers a property tax deferral program for seniors over 70 with low income, which can further reduce the property tax burden on retirees.
Estate and Inheritance Tax
Arizona does not have an estate or inheritance tax, which is another financial benefit for retirees looking to preserve their wealth for their heirs.
Pros and Cons of Retiring in Arizona
Let’s summarize with a quick pros and cons list:
Pros
- Tax-friendliness: Arizona is one of the most tax-friendly states for retirees, with zero taxes on Social Security benefits, relatively low state income tax, extremely low property taxes, and no estate tax.
- Warm climate: With over 300 days of sunshine a year, Arizona’s warm, dry climate appeals to retirees wanting to escape the cold, snowy winters of northern states.
- Outdoor activities: Arizona has abundant outdoor activities, including hiking, golfing, and outdoor recreation opportunities, which is a significant draw for active retirees.
- Affordable cost of living: Compared to states like California or New York, Arizona offers a more affordable cost of living, particularly when it comes to housing.
- Retirement communities: The state is home to hundreds of 55+ active adult communities, offering amenities and social opportunities that cater to seniors.
- Healthcare access: Retirees have access to a range of healthcare services in cities like Phoenix, Tucson, and Scottsdale, including access to the Mayo Clinic and other top-tier medical providers.
Cons
- Extreme summer heat: The intense heat, though dry, can be challenging for some retirees, particularly in southern Arizona. Temperatures regularly exceed 100°F in the summer months, which may limit outdoor activities.
- Limited public transportation: Arizona is a car-dependent state, and retirees who don’t drive may find it challenging to get around, especially outside of major cities.
- Healthcare access in rural areas: While urban centers have excellent healthcare facilities, rural areas may have limited options, requiring retirees to travel for medical care.
- Higher sales tax: While income tax may be low, Arizona’s sales tax can be high in certain areas, which can add up for retirees living on a fixed income.
- Growing population and housing costs: Arizona’s increasing popularity with retirees is part of the reason housing prices have been rising, particularly in the larger metropolitan areas. This could impact affordability in the long term.
Bottom Line
On balance, Arizona offers numerous benefits for retirees, from its tax advantages and abundant sunshine to its wide range of recreational opportunities and active adult communities. Its low cost of living is a significant plus for retirees concerned with stretching their savings.
However, it’s essential to factor in the extreme summer heat, limited public transportation, and rising housing costs, which could be drawbacks depending on your lifestyle needs and preferences. Weighing these potential drawbacks against the benefits can help you decide whether Arizona is where you want to live out your golden years.
If you need help planning your retirement in Arizona, reach out to the expert retirement planners and financial advisors at ARQ Wealth. You can call us at (480) 214-9572 or use our contact form to schedule a free consultation.
