Retirement Planning in Utah

How retirement planning works in a young state

Retirement planning has two phases. In the first you save and invest. In the second you convert what you saved into income that lasts, and that is the harder one because mistakes are tough to reverse. A sound plan lists your spending, adds up steady income, and sets a sustainable withdrawal rate from savings for the gap.

Utah has the youngest population in the country, but the 65 and older group is growing in absolute numbers. According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, about 11.9 percent of residents are 65 or older, about 70.2 percent of homes are owner occupied and the median home value is about $489,400. Many longtime owners have seen their homes gain enough value to change their retirement picture.

Utah tax treatment of retirement income

Utah collects income tax at one flat rate. The state does not exempt retirement income outright, but it has long offered credits that can offset the tax for retirees, including a retirement credit for older taxpayers and a credit connected to Social Security benefits. Both phase out as income rises, so the answer differs for a couple with $50,000 of income and a couple with $150,000. Because credits and thresholds change, confirm them with the Utah State Tax Commission or a tax professional every year.

Federal rules apply separately, and up to 85 percent of Social Security can be taxable federally. Mixing withdrawals from traditional, Roth and taxable accounts can hold the bill down. Our retirement planning guide explains required minimum distributions and Roth conversions.

Social Security timing

You can claim as early as 62, at full retirement age or as late as 70. Each year of delay past full retirement age increases the monthly check until 70, while claiming at 62 reduces it permanently. In a state where many wives have spent years raising children and have shorter earnings records, spousal and survivor benefits deserve extra attention. A couple should look at both records together, since the higher earner’s claim sets the survivor benefit. Create an account at ssa.gov to see your own estimate.

Utah Retirement Systems pensions

Teachers, state employees, public safety workers and many local government employees belong to the Utah Retirement Systems, known as URS. Employees who began before July 1, 2011 are in Tier 1, a defined benefit pension based on years of service and final average salary. Employees hired on or after that date are in Tier 2, which provides either a hybrid plan, combining a smaller pension with an employer-funded 401(k) account, or a defined contribution plan alone. Retirement age and service requirements differ between tiers, and public safety and firefighter systems have separate rules.

Before choosing a date, ask URS for a benefit estimate, compare payment options for a spouse and find out whether your job paid into Social Security. URS also offers voluntary 401(k), 457 and IRA accounts. A Tier 2 employee who wants a retirement similar to a Tier 1 colleague’s often must save more outside the pension, which is a good topic for an advisor.

Where to live in retirement

Utah retirees choose among very different places. Washington County around St. George is the well-known destination, with mild winters and golf courses, though summers are hot and water is a concern. Cache Valley and Utah County keep retirees near family and universities, while Park City and its neighbors suit those with resources. Smaller towns such as Ephraim, Kanab and Cedar City cost less but may mean longer drives for specialists. Many Utah retirees stay in the area where their grandchildren live, and a typical plan includes travel costs, family gifts and sometimes a service mission for a couple.

Missions, giving and family support

Many older Utah couples serve missions through their church after retirement, and these may require paying for housing, travel and living costs for 6 to 23 months. Others give steadily to their church as tithing. Neither is an unusual expense in this state, and both belong in the retirement budget. A planner will set aside the monthly amount, then check how it affects the portfolio. Giving appreciated stock or making qualified charitable distributions from an IRA can help after age 70 and a half.

Healthcare in retirement

Medicare begins at 65. Original Medicare covers hospital and medical services with deductibles and coinsurance, and many people add a supplement or choose a Medicare Advantage plan, plus a drug plan. Networks differ between the Wasatch Front, where Intermountain Health and University of Utah Health dominate, and rural counties with fewer providers, so check that your doctors participate before enrolling. Higher earners pay surcharges, which means income decisions affect premiums two years later. Retirees leaving work before 65 need a bridge, such as marketplace coverage or a spouse’s plan. The State Health Insurance Assistance Program offers free help comparing Medicare options.

Long-term care

Medicare covers only short skilled stays. Ongoing help with bathing, dressing or memory care can cost many thousands of dollars a month in Utah. Medicaid pays for people with limited assets and reviews transfers made in the years before an application. Options include savings, long-term care insurance, hybrid life policies with a care benefit and early planning with an elder law attorney. Our estate planning guide explains powers of attorney and health directives.

Want your numbers checked?

An advisor who serves Utah can test your plan against market drops and rising costs. There is no charge.

Request a free review →

Housing choices

Staying put keeps you near family, and a paid-off home leaves a low fixed cost, though upkeep, utilities and the water bill continue. Utah reduces the taxable value of primary residences, and counties offer property tax relief programs for lower-income older homeowners, including an abatement often called the circuit breaker. Rules, amounts and deadlines change, so contact your county. Downsizing from a large suburban home in Sandy to a condo can release equity, though prices for smaller homes in popular areas have also risen. Think too about stairs, snow and distance to medical care.

Drought, wildfire and smoke

Wildfire smoke and winter air inversions along the Wasatch Front affect people with heart and lung conditions, and some retirees plan around them. Drought has lifted water costs and reshaped yards, so many older homeowners replace turf with low-water plantings, sometimes with help from utility rebates. Earthquake exposure matters for owners as well, because standard homeowners insurance leaves it out.

Making savings last

Many planners begin by withdrawing a modest percentage of the portfolio in the first year and adjusting for inflation after that. The right figure depends on your age, the mix of investments and the flexibility of your spending. Keeping one or two years of spending in cash or short-term bonds lets you avoid selling stocks at a bad time. Our investing guide describes how stocks and bonds behave during retirement.

Questions to ask a retirement advisor

1. Are you a fiduciary on all advice, and will you say so in writing?
2. How will you set the order of withdrawals?
3. What is my total yearly cost in dollars?
4. How do you model healthcare and long-term care?
5. How often will we update the plan?
6. Have you worked with URS pensions and Utah credits?

Beneficiaries and documents

Retirement accounts pass to the person named on the form, not under a will, so review forms after marriages, births, deaths and divorces. Have a durable power of attorney, a health care directive and a will or trust in place. Utah has no estate or inheritance tax, but heirs who are not spouses must usually empty an inherited retirement account within ten years under current federal rules, which can create a tax burden.

A sample Utah couple

Consider a couple in Logan, both 64. He taught high school and belongs to the Utah Retirement Systems, and she worked part time while raising five children. They own a home worth about $450,000 with a small mortgage, have $300,000 in a 403(b) and an IRA, and give a tenth of their income to their church. The plan starts with spending of about $5,500 a month, including giving. Social Security and his pension cover most of it, and savings fill the gap. The big decisions are when she claims on her own record versus a spousal benefit, which pension payment option protects her if he dies first, and whether to keep the house once the children have left. Your numbers will differ, but the sequence of questions is the same.

Part-time work and phased retirement

Many Utahns keep working in some form after leaving a main career. A retired teacher might substitute, a tradesman might consult and a couple might run a short-term rental. Earnings before full retirement age can temporarily reduce Social Security benefits, though the withheld amount is later credited back. Part-time income also lets you delay claiming, which raises the lifetime check. Public employees who return to work for a URS employer should ask about rules on post-retirement employment before accepting a job, since benefits can be affected.

Roth conversions in low-income years

The years between stopping work and starting required distributions are often the lowest-income years of a lifetime. Moving some money from a traditional IRA to a Roth IRA in those years can lower future required distributions and leave tax-free money for heirs or for a late-life care bill. The cost is a larger tax bill now, at both the federal level and under Utah’s flat rate, and a possible effect on Medicare premiums and on state credits that phase out with income. Run the numbers with a tax professional before each conversion. Our budgeting and saving guide shows how to track the spending side that drives all of these choices.

Cabins, land and family property

Retirees in Utah frequently own a cabin in the mountains, a plot in a rural county or a family farm. Shared property can cause conflict among children, with questions about who pays taxes, who can use it and what happens if one child wants to sell. A written agreement, a limited liability company or a trust can set the rules in advance. Land assessed under the state’s farmland program may carry lower property tax, but a change in use can end the benefit. Talk to an attorney before transferring property, as a gift can affect the recipient’s tax basis.

Frequently asked questions