Although it may not be the most commonly mentioned state for retirement, Arkansas has been quietly attracting a growing population of retirees for many years. The increase in Arkansas’s retirement population has occurred for numerous reasons. With low tax rates, a mild four-season climate, numerous outdoor activities and a low cost of living, the state offers retirees a little bit of everything. For many people, they fell in love with the state because of its smaller towns, slower pace of life and an atmosphere of “Old South” hospitality. When all factors are considered, choosing to retire in Arkansas makes a lot of sense on many levels.
Creating a comfortable retirement in Arkansas requires the same basic planning that should be a part of any good retirement program. Although the state has an overall lower cost of living than many other areas of the country, having a solid financial plan in place can make retiring in Arkansas as rewarding as possible. Through understanding and implementing the basic steps required for building a solid retirement package, anyone can provide themselves a quality life in the golden years. All that is required is a little homework, a savings plan dedicated only to retirement and calculating how much income will be required for meeting the expenses of a desired retirement lifestyle.
The Basics of Retirement Planning
On both personal and financial levels, retirement is a major transition in life. Being able to maintain a desired lifestyle after leaving work behind requires long-term planning for assuring an adequate income to meet expenses. In order to be assured of adequate income during the retirement years, it is important to establish a solid retirement financial plan as early as possible. A good plan should include an attainable savings plan, evaluating expenses and a long-term commitment to entering the retirement years as financially prepared as possible. The most important rule in retirement planning is to implement the following components as early as possible.
Healthy Saving Practices
It is common knowledge that one of the best ways for building true wealth is through a regular, disciplined savings program. This is especially true for creating enough wealth to fully enjoy the retirement years. Building a savings net egg dedicated solely to retirement can assure a comfortable living in Arkansas even when unexpected expenses arise. While there are many different types of savings plans available, there are some that have distinct advantages for maximizing finances dedicated to the retirement years. The following savings plans offer tax-deferments and other benefits for providing a greater return om investments than standard savings accounts.
401(k) Plans
One of the most convenient ways to build a retirement nest egg is through a 401(k) plan. These plans, which are offered by companies to their employees, provide a disciplined approach to savings while also offering tremendous relief from both short and long-term tax liabilities. Each year, an individual can contribute funds into an account from their pre-tax employment income. The amount that can be contributed per year varies depending upon income levels. In some cases, employers will match the amount contributed by the employee as part of their benefits package. The biggest advantage of a 401(k) plan is that the yearly amount contributed does not need to be declared as income on tax returns for that year’s filings. Additionally, all earnings realized from the plan are not taxed until funds are withdrawn. Between the convenience of having funds deposited directly out of a paycheck and the tremendous savings in yearly tax liabilities, a 401(k) plan is a solid investment that pays dividends for a lifetime.
IRAs
Another solid option for building the adequate savings needed for a comfortable retirement in Arkansas is establishing an Individual Retirement Account (IRA). An IRA is a private savings account that allows individuals to make yearly contributions from up to a certain percentage of their employment incomes. As with a 401(k) plan, the amount contributed is not taxable for the year the funds are placed into the account and taxes on earnings are not applied until funds are withdrawn. There are many different types of IRA savings accounts available and they all provide tremendous long-term tax saving advantages.
Both 401(k) plans and IRA accounts are favored by retirement financial planners because of the advantages they hold in a lifetime of tax savings. Since these funds are not taxed until withdrawn from an account, the ultimate tax liability savings is maximized during the retirement years. Typically, the income levels for individuals during retirement years is lower than during the working years. When this is added to the fact that Arkansas does not tax Social Security and many other retirement incomes, the taxes paid on 401(k) and IRA accounts will be the lowest amount possible.
Other Retirement Savings Options
Annuities: Another dependable option for retirement income is annuities offered through insurance companies. There are many different types of annuities available that provide a defined payment each month for either a lifetime, or a fixed period of time, when someone reaches retirement age. The level of monthly income is determined by the amount contributed into the annuity, the type of annuity and the age at which someone wishes to begin receiving payments.
Company Pension Plans: There are many companies that offer retirement pension plans as part of their employee benefit package. These are normally either profit sharing plans or money-purchase plans. A formula is used to determine how much a person will receive each month during retirement based upon their level of contributions into the fund. One of the biggest advantages to a pension plan is that individuals will know exactly how much they will receive each month. This knowledge can make it much easier for developing a livable budget during the retirement years.
Regardless of how a retirement savings plan is structured, the key to long-term success is financial discipline. The only way to assure a comfortable retirement in Arkansas to through making regular contributions into savings accounts and using the accounts for no other purpose than meeting retirement expenses.
Estimating Retirement Needs
Estimating retirement incomes and expenses is an important part of any retirement plan. By taking the time to complete some basic calculations, anyone can determine what financial steps will be needed for realizing a comfortable retirement in Arkansas. The important thing is to develop a clear picture of what income will be needed for living a desired lifestyle during the golden years. A vital component in estimating future financial needs is being realistic about expenses. While some expenses may go down, other expenses such as health care may rise. In order to obtain a comfortable retirement, it is often necessary to eliminate some immediate expenses to create a secure future.
The bottom line is that there is no one, simple formula for calculating the exact retirement needs for everyone. What a person will need is based upon many widely varied factors including a desired standard of living, target retirement age and projected secure incomes. Fortunately, there are some basic decisions and calculations that can assist everyone in determining what will be needed to fund a retirement in Arkansas. These factors include:
- Deciding the age at which one plans to retire.
- Deciding the income needed for a preferred stand of living during the retirement years. This can be calculated by researching land housing costs, taxes, cost of living and other financial considerations in Arkansas. To be on the safe side, it is best to estimate on the high end for these figures.
- Calculate the current value of all savings, investments and other assets.
- Calculate a realistic rate of return on all investments. It is usually best to estimate these figures on the low side. After adjusting for inflation, a realistic rate of return will normally be between 6 to 10 percent. Determine if the rate of return on current investments will provided the necessary income needed at the time of a desired retirement age.
- Add up all expected incomes at retirement age like social security, pension plans, return on savings, annuities and other sources.
The above information will provide an overall picture of what will be needed for a comfortable retirement in Arkansas. There are numerous, free retirement calculators available on the internet that can make arriving at these figures much easier.
Reasons to Retire in Arkansas
Although relatively smaller in size than most states, Arkansas is filled with diverse cities and towns that host a wide range of retirement communities. With an abundance of natural areas and outdoor activities, the state provides a perfect setting for those who seek a slower pace without giving up their active lifestyles. Here are just a few of the reasons Arkansas is a popular choice for retirees.
Low Crime Rate
With a smaller population and a focus on small communities, overall crime rates in Arkansas are consistently lower than the national average. A big factor for many people who chose to retire in the state was the fact that they felt safe living there.
Low Tax Rates
The state sales tax in Arkansas is 6%, but many items like prescription drugs are exempt. Food is taxed at only 2%. Income taxes range from 1 to 7% depending upon income levels with many exemptions offered on retirement incomes. These exemptions include Social Security, VA benefits, worker’s compensation and a certain percentage of military retirement pay. Property tax assessments are based on only 20% of the true market value. For residents aged 65 or older, the assessed values of homesteads are capped at the previous year value unless improvements are made or the property is sold. In addition, the state has no inheritance or estate taxes.
Low Land and Housing Costs
The prices for both land and residences in Arkansas have consistently been much lower than the national average. These low prices not only apply to single-unit properties, but also to condos and the many planned retirement communities located throughout the state.
Geography and Climate
Much of Arkansas is still in its natural state and boasts considerable wilderness areas. The Ozark Mountains cover much of the state while the remaining areas are defined by gently rolling hills, timber lands and fertile farmland. Due to the abundance of natural areas, the state is widely known for an abundance of fishing, hunting and other outdoor activities. Highlighting the natural beauty of the countryside is a climate that is mild while still offer four distinct seasons.
Small Town Atmosphere
Whether one resides in a large city or small town in Arkansas, the state is well known for its friendly people and “Old South” pace of living. With most of the state being rural in setting, many communities still retain a small town atmosphere and cordiality.
Most Popular Retirement Locations in Arkansas
Little Rock
Being the capitol and the largest city in Arkansas, Little Rock and its outlying communities offer an abundance of retirement communities and diverse social activities. With a population of approximately 200,000 people, the area offers all the advantages of a large city while still retaining a small town feel. Many retirees have chosen Little Rock as their home due to the abundance of health care facilities, continuing education institutions, extensive park systems and convenient shopping opportunities.
Hot Springs
The Ouachita Mountains and Hot Springs National Park provide a scenic backdrop to this area filled with numerous planned retirement communities. The area hosts an abundance of activities including a learning/business center, senior interest groups, numerous golf courses, community events and convenient food service. The area is also well-known for its many lakes that provide year-round fishing opportunities.
Mountain Home
Located in the hills of the Ozark Mountains in the north central region of Arkansas, the greater Mountain Home region is one of the fastest growing retirement areas in the country. The area is defined by two massive lakes, three rivers and beautiful mountain scenery. Adding to its popularity among retirees is the Baxter Regional Medical Center, one of the top-rated regional medical facilities its size in the nation.
Blytheville
Located in the far northeastern portion of the state, the Blytheville area is known for its Mississippi River Delta atmosphere. It hosts a large retirement population in a carefree neighborhood setting filled with numerous activities and a downtown that offers numerous places for shopping and dining.
Fayetteville
Located in the northwestern portion of Arkansas, the City of Fayetteville consistently is included in “Best Places to Live” lists. It is home to the University of Arkansas and surrounded by the beautiful Ozark Mountains. The appealing aspect of Fayetteville for retirees is the low cost of living and thriving cultural scene.
Retirement Planners in Arkansas
Achieving retirement goals often requires the assistance of a qualified retirement financial planner. For additional information on retirement in Arkansas and the best ways to reach retirement goals, the following planners can be of assistance.
Hutchinson Financial, Inc.
12511 Cantrell Road
Little Rock, AR 72223
www.hutchinsonfinancialinc.com
Cynthia L. Conger, CPA PA
2300 Andover Court, Suite 560
Little Rock, AR 72227
www.cindyconger.com
Roger Clement, CFP
Clement Financial Services, Inc.
2400 S.E. “C” Street
Bentonville, AR 72712
www.Clementfinancial.com
James Ashby
Mustard Seed Financial, LLC
P. O. Box 9304
Magnolia, AR 71754
www.mustardseedfinancial.com