Learn about retirement in Arizona, from taxes and income to lifestyle choices

Where you want to retire is a big decision. Arizona, which is in the top 5 most popular places to retire, had a net increase of over 25,090 retirees over the age of 60 in 2021. You might be considering retiring in Arizona for a number of reasons. The growing retirement community, taxes, recreation, sunny climate, and other factors make Arizona quite attractive. Let’s dig into a few pros and cons of Arizona retirement so you can make an informed decision about living there.

Key Takeaways:

This article is meant to help you learn more about Arizona’s retirement community and decide if Arizona is a good place for you to retire. Here are a few factors to consider about the state:

  • Arizona is a moderately tax-friendly state for retirees.

  • There are 151 retirement communities in Arizona, which can help keep you social. 

  • The climate is dry and sunny year-round and there are plenty of outdoor activities though heat, allergies, and other health concerns are worth keeping in mind.

  • Housing is more expensive than the national average, but there are tax relief programs for seniors and relatively low-cost homeowner’s insurance options. 

  • Arizona’s healthcare for seniors is ranked lower nationally, but there are plenty of good Medicare options available.

Benefits and Drawbacks of Retiring in Arizona

A big part of deciding if Arizona is a good place to retire depends on how tax-friendly the state is, what the retirement community is like, how affordable the housing is, what the climate is like, and what your healthcare options are. We’ll dig into each of these factors.

Retirement Taxes in Arizona

Arizona is a moderately tax-friendly state for retirees. Here are a few key points to keep in mind about its income taxes:

  • Social Security income is not taxed.

  • Withdrawals from retirement accounts, (401(k)s and IRAs), are fully taxed. 

  • Wages are taxed at normal rates. Your marginal tax rate is 2.55%.

  • Public and private pensions are partially taxed.

Arizona is aptly named a “moderately” tax-friendly state because Social Security isn’t taxed, but withdrawals from retirement accounts, pensions, and wages are taxed.

Federal and Arizona retirement plans can also exempt up to $2,500 of your income. Plus, retired members of the military benefit from an exemption on military retirement pay up to the first $3,500.

Retirement Communities in Arizona

As of 2023, older Americans are choosing Mesa, Arizona to retire more than any other city in the United States. This city also saw the highest net gain of retirees for three years in a row. It’s no wonder that people flock to retirement communities in Arizona — this state established the first residential development for people 55 and up. Now retirees can enjoy up to 151 active retirement communities in the state. 

These retirement communities  make it easier for you to find a social scene that suits your lifestyle. For some, the dry, sunny climate and year-round warm weather makes Arizona a particularly enticing place to retire, especially if you’re drawn to outdoor activities like golfing, pickleball, hiking, scenic drives, and exploring national parks. 

Climate and Outdoor Recreation in Arizona

Of course, climate is a huge consideration when it comes to deciding where you want to retire. Sunny, warm weather all year round can boost mental health. Those suffering from arthritis also may find relief from weather-induced symptoms by living in warmer areas. 

However, while the sunny climate and beautiful landscape can be tempting, it’s important to spend some time in different parts of Arizona to see how your body and mind react to this new place. Retirees who suffer from asthma and allergies may find increased sensitivity to dust, air pollution, and heat during the summer. 

Housing & Cost of Living in Arizona 

In 2023, the median home value in Arizona was $414,260, which skews higher than the national average of $346,270. Florida, another popular destination for retirees, has a median home value of $387,537. 

While Arizona’s housing is more expensive than the national average, citizens of the state pay 0.51% in property taxes, which is much lower than the national average of 0.99%. What’s more, Arizona also offers property tax relief programs to help seniors, like the Senior Property Valuation Protection Option (SPVF). If you meet the income limits and other qualifications, this program freezes the property valuation of residential homeowners who are aged 65 years or older so that your property taxes won’t increase. 

Another housing cost benefit in Arizona is that homeowners insurance is relatively cheap compared to the national average. The national average rate is $1,428 while Arizona’s average rate is $1,268. 

While property taxes and homeowner’s insurance rates are relatively low, the cost of living is increased by a higher sales tax. Arizona’s combined state and local tax rates average out to 8.37%. For reference, most states have sales taxes that range from 4% to 7%. 

Quality of Healthcare in Arizona

According to the United Health Foundation, Arizona ranks 30th in overall health for older adults. That said, you can find great hospitals in the state, like the Mayo Clinic in Phoenix. Medicare options in Arizona are also widely used by retirees. About 1.4 million adults use Medicare, which is 19% of the state’s population. Learn more about Medicare in Arizona below.

Medicare in Arizona

Health insurance is top of mind for anyone retiring. Signing up for Medicare in Arizona is less complicated than you might think.

If you are aged 65 and up and are a US citizen, you are eligible for Medicare. You’re also eligible if you’re under 65 but have certain disabilities like ALS or End-Stage Renal Disease.

You are eligible to enroll in Original Medicare, Part A and Part B, during your Initial Enrollment Period. This is a 7-month window around your birthday. It includes your birth month, 3 months before your birth month, and 3 months after.

Once you sign up for Medicare, you’ll want to compare additional coverage options. There are other choices to consider such as Medicare Supplement plans, Part D (prescription) plans, and Medicare Advantage plans. Learn more about additional coverage options here

Lastly, make sure you get the best value from your Medicare plan by using all parts of it (like free, preventive appointments and extra benefits). We also recommend that you regularly review your healthcare needs and other coverage options to ensure you’re always receiving the best coverage.

Every person and plan is unique. Our licensed Arizona Medicare Advisors are here to answer any specific questions and provide personalized advice to help you feel confident in your Medicare coverage. 

Retiring in Arizona

Arizona can be a retirement friendly state in some regards, but understanding the whole picture is important when deciding to settle there. Find out if Arizona is the right place to retire by spending some time in the state (if you can) and feel out the different cities. 

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