Ultimate guide to retiring in Iowa

Iowa, known for its friendly communities and beautiful rolling landscapes, is a popular choice for retirees. Whether looking for small-town charm or vibrant urban life, Iowa offers comfort and affordability. This guide explores retiring in Iowa, including retirement age, the best places to live, and strategies to support a comfortable retirement.

What age can you retire in Iowa?

The ideal age to retire in Iowa depends on your financial situation and Social Security benefits. Here's an overview of the key retirement ages.

Early retirement (age 62)

You can start collecting Social Security benefits at 62, but you'll have reduced monthly payments. Retiring early means a permanent reduction in your benefits by as much as 30%, so you should balance this option with your long-term income needs.

Full retirement age (66-67)

If you were born between 1943 and 1954, your full retirement age is 66. For those born after 1960, the FRA is 67. Claiming Social Security at your full retirement age ensures you receive 100% of your benefit amount.

Delayed retirement (up to age 70)

Delaying your Social Security benefits beyond your FRA can increase your monthly payout by approximately 8% per year up until age 70. This can be a good strategy if you want to maximize your retirement income, especially if you expect a longer retirement.

Deciding when to retire in Iowa depends on your financial readiness, health, and lifestyle preferences. Weighing the benefits of early, full, or delayed retirement will help ensure long-term financial security.

Why do people choose Iowa to retire?

Iowa offers a variety of benefits for retirees seeking affordability, peace, and a welcoming community. Here are some of the reasons people choose Iowa.

Low cost of living

One of Iowa's biggest draws for retirees is its affordable cost of living. Housing, groceries, and health care are all significantly cheaper than the national average, allowing you to stretch your savings further.

Affordable health care

Iowa has a relatively low cost of health care compared with other states. With excellent hospitals, especially in Des Moines and Iowa City, you can access high-quality, affordable care.

Friendly communities

Small towns and cities across the state offer welcoming, supportive environments, making it easy for retirees to feel at home and build relationships.

Scenic beauty and outdoor activities

Iowa has beautiful landscapes, so you can enjoy outdoor activities, such as fishing, hiking, and bird-watching, in peaceful settings.

Tax benefits for retirees

Iowa provides tax relief for retirees by exempting Social Security benefits from state taxes. Some retirement income, such as pensions and IRA withdrawals, is eligible for partial tax exemption, making it a tax-friendly state for those on a fixed income.

Four distinct seasons

The state has four distinct seasons, from snowy winters to warm summers and colorful autumns. Retirees who enjoy seasonal changes will appreciate Iowa's climate, with opportunities for outdoor recreation year-round.

Cultural offerings

It may be rural, but Iowa has plenty of cultural events, festivals, and entertainment. Des Moines and Cedar Rapids have theaters, museums, and concert venues, while small towns host festivals and farmers' markets.

Cons of retiring in Iowa

While Iowa has many advantages, it also has a few drawbacks that you should consider.

Harsh winters

Iowa winters can be long and cold, with significant snowfall and freezing temperatures. If you prefer a warmer climate, you may find the winter months challenging, especially in northern parts of the state.

Limited public transportation

Outside of the larger cities like Des Moines and Cedar Rapids, you've limited public transportation options. If you no longer wish to drive, you may find it difficult to get around in rural areas.

Rural isolation

For those living in more rural parts of Iowa, it can feel isolated, especially during the winter. You may have limited access to services, entertainment, and health care in these areas.

Higher state income tax

While Iowa offers some tax relief for retirees, it also has a relatively high state income tax compared with other Midwestern states. This could impact retirees with significant income from pensions or investments.

Smaller job market for part-time work

If you plan to work part-time during your retirement, you may find fewer opportunities in Iowa, particularly in rural areas. The job market is smaller and more focused on agriculture and local services.

Limited cultural diversity

Iowa is less culturally diverse than larger states. If you want a more cosmopolitan lifestyle, you may find the state limiting in terms of cuisine, cultural activities, and social experiences.

High property taxes in some areas

While the overall cost of living is low, some areas have higher property taxes. You should research local tax rates before purchasing property to avoid unexpected costs.

Best places to retire in Iowa

Iowa is home to a variety of charming towns and vibrant cities. Here are five of the best places to retire in the state.

Des Moines

As the state capital and largest city, Des Moines offers a mix of urban amenities and small-town charm. The city has a vibrant arts scene, quality health care, and an affordable cost of living. With access to parks, cultural events, and dining options, Des Moines provides a well-rounded retirement experience.

Iowa City

Home to the University of Iowa, Iowa City has a lively arts and cultural scene. You can enjoy concerts, theater performances, and lectures while benefiting from excellent health care provided by the university's hospital. Its small-town feel, combined with big-city perks, makes it an attractive place to retire.

Cedar Rapids

Cedar Rapids is a midsized city with a welcoming community, affordable housing, and ample recreational activities. The city's riverfront parks, museums, and cultural venues provide plenty of entertainment options. The city also offers strong health care options and a relatively low cost of living.

Dubuque

Located along the Mississippi River, Dubuque is a city with a rich history and stunning river views. The town offers a peaceful environment, with outdoor activities such as fishing, hiking, and riverboat cruises. Dubuque's historic downtown and friendly community make it a great option for those seeking a quiet, scenic retirement.

Ames

Ames, home to Iowa State University, provides a vibrant and youthful atmosphere. You can enjoy university-sponsored events, lectures, and performances while living in a relaxed, small-town setting. Ames also has a relatively low cost of living and excellent health care facilities.

Why choose Iowa to retire?

Compared with neighboring states of Nebraska, Minnesota, and Illinois, Iowa offers retirees several unique benefits.

Affordable living

Iowa consistently ranks as one of the most affordable states in the U.S. Housing costs, utilities, and general expenses are significantly lower than Illinois or Minnesota, making it an ideal choice if you want to stretch your retirement savings.

Tax-friendly policies for retirees

Iowa's exemption of Social Security benefits from state income tax and partial exemptions for pension and retirement income give it a tax-friendly edge over neighboring states.

Strong health care options

The state has a reputation for quality health care, with top-ranked hospitals in Des Moines and Iowa City. Health care costs are lower than in some surrounding states.

Cost of living in Iowa

Iowa is one of the most affordable states to live in, which is a major draw for retirees. Here's a breakdown of common expenses.

Housing

• Des Moines and surrounding areas: The average home price is around $221,000, while monthly rents range from $800 to $1,500.
• Rural Iowa: Home prices in rural areas can be as low as $100,000 to $150,000.

Groceries and transportation

• Groceries: Grocery costs in Iowa are below the national average, making it affordable to maintain a comfortable standard of living.
• Transportation: Iowa's fuel prices and vehicle maintenance costs are relatively low, but having a car is necessary in most areas due to limited public transportation.

Health care costs

Iowa's health care costs are below the national average, especially in larger cities, such as Des Moines and Cedar Rapids, which have major hospitals and medical facilities. You can access high-quality care at lower costs than in many other states.

Comparison with other states

Iowa's cost of living is significantly lower than that of neighboring states. Housing, health care, and everyday expenses are all more affordable, making it an attractive option if you're looking to maximize your retirement income.

Creating additional income streams to support retiring in Iowa

Even with Iowa's low cost of living, planning for additional income streams during retirement can help ensure financial security. Here are strategies you might consider.

Retirement savings

Contributing to tax-advantaged accounts like 401(k)s, IRAs, or Roth IRAs during your working years can help you build a solid financial foundation. These savings accounts can provide significant income during retirement.

Health savings accounts

HSAs allow you to save pre-tax dollars for future health care expenses. Since health care may be one of the biggest costs in retirement, contributing to a HSA can help you cover out-of-pocket medical expenses.

Income annuities

Income annuities, including fixed annuities, offer retirees a guaranteed income stream. In exchange for a lump sum payment, the insurance company provides regular payments for a specified period or for life. Fixed annuities can help cover essential expenses, such as housing, groceries, and health care, providing a stable source of income.

Ways to save on retirement in Iowa

Here are several strategies you can use to save money and ensure financial security during your retirement in Iowa.

Fixed annuities

A fixed annuity is an insurance product that provides guaranteed income over time, helping you manage your finances. With a fixed interest rate, fixed annuities offer predictable payments, giving you stability and peace of mind. This can be particularly helpful in managing property taxes and health care costs.

Immediate annuities

Immediate annuities start paying out right after the initial investment, offering you a quick and steady income stream. This is a great option if you want immediate financial support during retirement, as it ensures a regular flow of income from day one.

Senior property tax credits

Iowa offers seniors several property tax relief programs, including credits and exemptions that can lower your property tax burden. You should explore these options when purchasing a home in the state.

401(k) and IRA accounts

Contributing to 401(k) or IRA accounts during your working years ensures you have a tax-advantaged way to save for retirement. In Iowa, these savings can help cover essential costs while minimizing your tax burden.

Iowa is an excellent state for retirees who value affordability, community, and access to nature. With proper planning, including tax-advantaged savings and income annuities, you can enjoy a comfortable and peaceful retirement in the Hawkeye State.

MM202711-310873