Retirement Planning in Kansas

Retiring where the sky is big

An income plan for the years after work has to answer a simple question: what will come in each month, and what will go out. In Kansas the answer draws on several streams. Teachers and state workers may have a KPERS pension. Farmers and ranchers may have land rent, crop sales or a sale of the operation. Many private sector retirees from aircraft plants, hospitals and offices have a 401(k), an IRA and Social Security. Putting them in order is most of the job.

According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, about 17.0 percent of Kansans are 65 or older, about 67.2 percent of homes are owner occupied and the median home value is about $217,200. Owners with a mortgage pay a median of about $1,689 a month. A retiree whose house is paid off can live on much less than the state average, which is a major reason people stay.

Taxes on retirement income

Kansas exempts Social Security benefits from state income tax for filers whose income is under a threshold, and the exemption has been broadened in recent years. A retiree just above the line may see part of the benefit taxed, so the combined total of pension, IRA withdrawals, interest and gains matters. Kansas generally exempts KPERS benefits, federal civil service pensions and, more recently, military retirement pay. Private pensions and IRA withdrawals are taxed like other income. Federal tax still applies, and required minimum distributions start in your seventies. Confirm current thresholds with the Kansas Department of Revenue or a tax professional. Our retirement planning guide walks through Roth conversions and withdrawal order.

KPERS: reading your statement

The Kansas Public Employees Retirement System covers school staff, state employees and many city and county workers. The formula depends on your tier, which depends on when you were hired. Tier 3, for people hired after 2015, uses a cash balance design with a set interest credit, so the benefit looks more like an account than a traditional pension. Older tiers pay a lifetime benefit based on salary and service. At retirement you choose a payout option. The highest check stops when you die, while joint and survivor options protect a spouse for a smaller monthly amount. Request an estimate and compare options with your spouse before signing.

Social Security timing

You can claim at any point between 62 and 70. Waiting raises the monthly check by roughly eight percent per year past full retirement age, and claiming at 62 reduces it permanently by up to about a third. For couples, the higher earner’s age at claiming sets the survivor benefit, so waiting often protects the surviving spouse. Public employees who did not pay into Social Security may see federal rules reduce their benefit, so look at your statement and the Social Security Administration website.

Medicare and care in rural Kansas

Medicare starts at 65. Many retirees pick between a supplement plan that works with most providers and a Medicare Advantage plan with a network. In a state where the nearest specialist might be an hour away, check whether your clinic and regional hospital are in network. In Wichita, Topeka and the Kansas City area there are many choices, while in the western counties a Medicare Advantage network may be thin. The Senior Health Insurance Counseling for Kansas program gives free, unbiased help. Higher income can trigger Medicare premium surcharges two years later, which is one reason to watch large Roth conversions or land sales.

Paying for long-term care

Care is the largest unplanned expense for many families. Medicare covers little of it. KanCare, the state’s Medicaid program, pays for nursing home costs for people who meet income and asset limits, and it looks back at gifts made in the years before applying. Options include savings, long-term care insurance, hybrid life policies and family care. Rural nursing homes have closed in several counties, so some families end up moving parents closer to a city. Our estate planning guide covers powers of attorney and health care directives.

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The farm and retirement

For a farm couple, retirement and succession are one decision. Many farmers keep ground and rent it, so rent becomes the paycheck. Others sell machinery, keep the house and move to town. Consider a retirement account separate from the farm, because land cannot be spent monthly. Crop share leases, cash rent and sales each produce different tax results, and installment sales spread out gain. If you own mineral rights or turbine leases, add those payments to the income forecast.

Staying, downsizing or moving

Staying in the family house keeps your church, friends and doctor. Downsizing in the same town can cut upkeep. Some retirees from the Kansas City area move to lower cost towns, others choose Lawrence or Manhattan for the university culture, and a few leave for warmer states. Homeowners 65 and older with limited income may qualify for a property tax refund through the Safe Senior program or the homestead refund, and the rules and thresholds change. Check with the Kansas Department of Revenue. Our budgeting and saving guide can help with the monthly costs of each choice.

Making the portfolio last

Longevity risk is real: a 65 year old couple has a good chance that one spouse lives into their nineties. A withdrawal plan accounts for market ups and downs by keeping one to two years of spending in cash and short bonds. Flexible spending that trims after bad years helps. Annuities can cover bills for people without pensions, but fees and surrender charges vary, so compare quotes. Our investing guide explains how stocks and bonds behave in retirement.

Questions for a retirement advisor

1. Are you a fiduciary? Get the answer in writing.
2. How will you set my withdrawal order?
3. How are you paid, in dollars?
4. How do you plan for care costs?
5. Do you understand KPERS or farm income?
6. How often will we update the plan?

Beneficiaries and paperwork

Retirement accounts pass by beneficiary form, not by will. Review your forms after a marriage, divorce, birth or death. Keep powers of attorney and health care directives current, and consider a transfer on death deed if you own land or a house. Most non-spouse heirs must empty an inherited account within ten years, which can raise their tax bill.

Military and federal retirees

Fort Riley, Fort Leavenworth and McConnell Air Force Base leave behind many retirees who stay in Kansas after service. Military retirement pay, the Survivor Benefit Plan, TRICARE for Life and VA benefits form a different income stack from a private career. Kansas has been moving toward exempting military retirement pay from state income tax, and federal civil service pensions are exempt as well, so compare after tax income across states if you are deciding where to settle. Retired federal workers should check Federal Employees Health Benefits and Medicare timing, because dropping the wrong one can be costly. Confirm the current rules with the Kansas Department of Revenue.

Royalties, wind leases and land income

Many retired Kansans collect rent on ground, oil and gas royalties from wells in the south central or western counties, or payments for a wind turbine on the property. These checks can be a large share of income, and they behave differently from a pension. Royalties fall when prices fall or a well runs dry. Turbine leases run for decades but can include escalators and decommissioning terms that your attorney should read. Planning means treating each as a variable income source, stress testing the budget without it and setting aside reserves from the good years.

A sample couple in Hutchinson

Picture a couple, 64 and 62, in Hutchinson. He retires from a manufacturing job with a 401(k) of $450,000, and she teaches with a KPERS pension that pays a modest monthly amount at 62. They own a paid off house worth about $190,000 and expect Social Security to add to income. They need roughly $5,200 a month after tax. The advisor might suggest she takes her pension with a spouse option, he waits until 67 to claim Social Security, and they draw from the 401(k) in the gap years while keeping income under the Kansas threshold. These figures are examples, not predictions, but the logic of bridging the gap is common.

Estate recovery and gifting to family

Retirees often want to help children or grandchildren. Gifts are fine in moderation, but large transfers within a few years before applying for Medicaid can create a penalty period. KanCare can also seek repayment from an estate after the recipient dies in some cases. Kansas has no inheritance tax, which makes outright gifts and bequests simpler than in states that do. Talk with an elder law attorney before moving land or a house into family names, and keep records of what you give and when.

Your first year in retirement

The first twelve months set the pattern. Many retirees spend more early, on travel and projects, and then settle. Set a monthly paycheck from savings, keep a cash buffer and watch the first year of withdrawals. Make the Social Security and Medicare decisions on schedule, update beneficiaries and confirm your estimated tax payments, since there is no longer a paycheck withholding for you. Revisit the plan every year or after a major change such as a death, a move or a health event.

A retirement budget in Kansas dollars

Spending usually falls into three buckets. Essentials cover housing, food, utilities, insurance and healthcare. Flexible spending covers travel, hobbies and gifts. One time costs cover a new roof after a hailstorm, a truck or a hearing aid. Because owners with a mortgage pay a median of about $1,689 a month and many retirees have none, essentials may run well below the national average, which leaves more room for family visits. List what you spend now, remove work costs and add healthcare, then test the total against steady income such as Social Security and a pension.

Frequently asked questions