7 Pros and Cons of Retiring in Kentucky

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You probably are drawn to retiring in Kentucky due to the Kentucky Derby, good bourbon, and relatively mild weather. But there’s more to the world’s horse racing capital than that, both good and bad.

The main pros of retiring in Kentucky include a fairly retiree-friendly tax system, friendly people, plenty of opportunities for fun and adventure, and a low cost of living. Potential drawbacks include heavy traffic, a high risk of natural disasters, and adjusting to the southern accent.

Read on for a detailed explanation of the good and bad about retiring in Kentucky. 

Pros of Retiring in Kentucky

A Fairly Retiree-Friendly Tax System

Kentucky’s tax system generally suits retirees due to several reasons. First off, Social Security income is fully exempt from taxation. Seniors also enjoy a sizable deduction of $31,110 per individual for other retirement income types such as IRA, 401(k), and pension income. All retirement income exceeding this deduction amount will be taxed at a 5% income tax rate.

While Kentucky’s income tax rate may seem like a lot given that some states (like Alaska, Nevada, Florida, Wyoming, South Dakota, Washington, and Texas) don’t impose any income taxes on retirees, it’s still much lower than the rates in many states. To give you some perspective, seniors in California, Minnesota, and Vermont have to make do with income tax rates of 13.3%, 9.85%, and 8.75%, respectively.

While states that don’t charge income tax may seem attractive, most of them have other ways of collecting revenues. For instance, property or sales tax rates may be set high to make up for the lack of income tax. Kentucky’s property and sales taxes are lower than the national average.

The state’s average applicable property tax rate is about .083%. Senior homeowners aged 65 and above enjoy the state’s homestead exemption as long as they live in the property. The exemption amount varies year to year (for 2019-2020, it was $39,300) and is usually deducted from your homestead’s assessed value to arrive at the taxable property value.

The sales tax stands at a modest 6%. Several of the items commonly used by seniors aren’t taxed to help keep their prices low. Examples of such products include prescription drugs, most types of groceries, and prosthetic devices.

The one issue you may have with Kentucky’s tax system as a senior are the rates for inheritance and capital gains. Capital gains are taxed as regular income. That means they’ll be added to the sum of your retirement income before you subtract the retirement income deduction to arrive at your net taxable income.

As for inheritance tax, your beneficiaries won’t pay any if they’re directly related to you. Beneficiaries who qualify as direct relatives include a spouse, brother/sister, parent, child, half-brother/half-sister, or grandchild. Indirect relatives include nieces, uncles, nephews, aunts, great-grandchildren, and daughters/sons-in-law.

Indirect relatives qualify for a tax exemption of $1000 and will be taxed at rates between 4% and 16% on inheritance valued above that amount. The total tax-deductible for non-relatives stands at $500, with applicable tax rates for inheritance valued excess of this amount ranging from 6% to 16%.

The People Are Friendly

While there are always going to be a few exceptions, most people in Kentucky are a lot friendlier than many other states. They also drive a lot slower, let seniors across the street, wave whenever appropriate, and may let you take your time to find your way in the parking lot without giving you an earful. 

In short, expect plenty of door holding, his and byes, and general respect and manners from total strangers.

Low Cost of Living

By definition, the cost of living refers to the amount of money you need to maintain a certain living standard. This figure comprises essential expenses like food, healthcare, housing, utilities, taxes, clothing, etc. In short, the cost of living is one of the most accurate ways to compare the affordability of the various parts of the country.

Across the board, Kentucky’s cost of living is lower than the national average. We’ve already seen how the taxes compare to the rest of the country; let’s not go into that. Instead, let’s focus on other critical determinants of the cost of living.

Generally, utilities for a relatively small apartment cost less than $140. You might also be able to eat a decent meal at an inexpensive restaurant for only $8. The housing cost is also lower than the national average for both renters and those looking to own a home. 

Based on 2018 housing data, you may be able to buy a decent home for around $150,000. This is probably why more than half of the homes in Kentucky are owner-occupied and not rented. Speaking of renting, you can rent a decent unit for about $850, which is lower than the national average.

Plenty of Opportunities for Fun and Adventure

7 Pros and Cons of Retiring in Kentucky

There are virtually endless fun activities for the outdoor type. Some of the honorable mentions include cross-country skiing during winter, touring the Mammoth Cave National Park and Lake Cumberland, and hiking and climbing in Red River Gorge. Other areas you’ll want to visit are the Lost River Cave in Bowling Green, Daniel Boone national forest, and the river town of Paducah (home to the quilt museum).

The Derby season is arguably the most fun part of the year in Kentucky. The Kentucky Derby is hosted at Churchill Downs in May of each year and brings about what some people refer to as the “fifth season” of the year (you know, another season on top of the usual summer, winter, spring, and autumn seasons). Basically, this season is several weeks of celebrations, festivals, and parties before the big day of racing.

Cons of Retiring in Kentucky

The Language Takes Some Getting Used To

It’s not like you’re going to need a translator, but the southern drawl will take some getting used to, especially if you’re from the American coasts. Some words will be challenging to understand, making social interactions difficult (or awkward at the very least). For instance, what most Americans call a dirt road is referred to as a “holler.”

Mother Nature Can Sometimes Be Scary

Even though labeling Kentucky as “extreme” wouldn’t be accurate, nature can sometimes be frightening in this part of our country. Kentucky is part of the Hoosier Alley and has a history of sometimes fatal tornadoes and storms.

The Eastern part of the state is particularly prone to natural disasters, with Grayson county having been hit by costly floods and storms almost ten times since 2002. Louisville is also somewhat of a “hotspot.” It has a higher-than-state average natural disasters risk, with flooding being the most significant threat.

The most disaster-prone part of the year happens to be the Derby period, between April and May. In the past, most of the floods, mudslides, rockslides, tornadoes, and storms struck around this time of the year.

In all fairness, though, the various counties in the state have adequate disaster preparedness resources. Also, you can always consult the disaster risk map before purchasing a property in any part of the state.

Traffic Can Be a Problem

The fact that the friendly people of Kentucky drive slower than most parts of the country hurts traffic. Add to that the fact that most people own two to three cars and prefer to ride alone, and it becomes clear just how significant of a problem traffic congestion can be in most parts of the state. As you’d expect, traffic is mostly an issue in large cities.

Bottom Line

Generally, the pros of retiring in Kentucky outweigh the cons. A low cost of living, reasonably retiree-friendly tax rates, and plenty of opportunities for fun and adventure are the state’s main selling points. On the other hand, occasional natural disasters and traffic may be deal-breakers for some people. 

Ultimately, the final decision on whether to retire in Kentucky lies with you because picking a retirement destination is entirely a personal thing, and everyone’s needs are different.



Hey there, my name is Ruth, I'm in my late fifties. My life was turned upside down a few years ago as I experienced a burn-out. But I saw it as a sign that something had to change in my life. I'm happy I used this tough experience as a stepping stone. I now feel happier than ever and hope to inspire you to do the same, no matter how old you are.

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