You can drive from Pennsylvania to Delaware in under an hour, but if you’re retired or getting close, crossing that line may have more of a financial impact than you’d expect. While retirement isn’t only about finances, state taxes and other location differences can significantly influence how far your money goes.
Many retirees focus on how much they’ve saved, but where and how you spend in retirement is a factor not to be overlooked. With offices in both Pennsylvania and Delaware, Foundation Wealth Management is perfectly positioned to help you pick apart the differences and decide which state fits your retirement goals.
State Lines, Real Differences
At first glance, Pennsylvania and Delaware might seem like two sides of the same coin: four seasons, access to major metro areas, and a blend of rural charm and suburban convenience. But ask a local, and you’ll hear some strong opinions. Whether it’s Delaware’s beaches or Pennsylvania’s mountains, there’s no shortage of reasons to love where you live. Still, when it comes to retirement, the financial realities of each state can tell two different stories.
Pennsylvania has a flat state income tax rate of 3.07%. The good news is that it does not tax Social Security, pensions, or retirement account withdrawals (like IRAs or 401(k)s) as long as you’re old enough to qualify for retirement under their guidelines.
Delaware, on the other hand, also doesn’t tax Social Security income. It does, however, have a graduated income tax ranging from 2.2 to 6.6 percent. For retirees over 60, the state offers a $12,500 exclusion on pension and retirement income, which helps reduce the tax burden for many.
Bottom line: If you’re living on a modest retirement income, the tax difference between the two states may be minimal. But if your income is higher or includes retirement investments, Delaware’s tax structure might cost you more year-to-year.
Cost of Living and Lifestyle
Property taxes can be a hidden budget-buster in retirement, and this is where Delaware often stands out. While Pennsylvania’s property tax rates vary widely by county, the statewide average is about 1.41%. In Delaware, the average is closer to 0.6%.
Here impact for a $300,000 home in each state:
- Pennsylvania: 1.41% effective property tax rate on a $300,000 comes to $4,230/year
- Delaware: 0.6% effective property tax rate on a $300,000 comes to $1,800/year
It’s important to not take all comparisons at face value as it’s often noted that home values are higher in DE compared to PA. Meaning, the $300,000 homes we are comparing may be larger or newer in Pennsylvania compared to a similarly valued home in Delaware. Simply put, location greatly impacts property taxes and valuation, and it’s worth reviewing the impact wherever you live.
Delaware also has no sales tax, which can add up if you do a lot of shopping or home improvement projects. Pennsylvania has a 6 percent sales tax, with some counties adding a bit more.
When it comes to housing and day-to-day expenses, rural Pennsylvania often comes out ahead. As we’ve noted, housing costs in much of the state are lower than most of Delaware. However, Delaware offers a unique blend of small-town living with easy access to bigger cities like Philadelphia and Baltimore. That makes it attractive to those who want convenience without the cost of living in a major metro.
And then there’s the terrain. Pennsylvania offers rolling hills, wooded countryside, and peaceful river retreats. Delaware may be flatter, but its coastline and sandy beaches are a major draw for many retirees. So, which landscape feels more like home to you?
The Bottom Line: Choose Based on What Matters Most to You
There’s no one-size-fits-all answer when it comes to choosing where to retire. If keeping taxes low and being near a major airport or hospital is your priority, while taking in beach-front sunsets, Delaware could be a better fit. If you’re more focused on finding a quiet rural property, stretching your housing dollars, or living the big city life, Pennsylvania certainly offers a lot of value.
If you’re weighing these decisions, a financial advisor can help you map out how state-specific taxes and costs impact your retirement picture. After all, the goal isn’t just to retire, it’s to retire well.
About Foundation Wealth Management
Foundation Wealth Management is a CPA-led organization, that provides financial planning services and tax planning support; services and outcomes vary based on each client’s circumstances. Our team includes qualified professionals, such as CPAs and CFP®s, who are integral to our service offerings. Our team includes 3 Certified Financial Planners: Burt Hutchinson, CPA, CFP®, Paul LaViola, CFP®, and Stephen McDade, CFP®.
As Fee-Only planners, we are compensated directly by clients rather than through commissions from brokerage or insurance products, which we believe helps align our services with client goals.
Sources:
- https://www.pa.gov/agencies/revenue/resources/tax-rates.html
- https://taxfoundation.org/location/delaware/
- https://revenue.delaware.gov/frequently-asked-questions/personal-income-tax-faqs/
- https://smartasset.com/taxes/pennsylvania-property-tax-calculator#:~:text=Overview%20of%20Pennsylvania%20Taxes,from%200.83%25%20to%202.05%25.
- https://smartasset.com/taxes/delaware-property-tax-calculator
Disclosure Statement:
This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice. All investments are subject to risk, including the possible loss of principal.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, Past performance is not a guarantee of future results.
