Retiring Across State Lines: Arkansas vs. Missouri Tax Planning in Your 60s

Social security income is usually one of the largest retirement income sources in your 60s and 70s. Understanding whether your state will tax social security benefits is the first question to answer.

Arkansas fully exempts all social security retirement benefits from state income tax. Only federal rules apply. There is no retirement income exemption threshold or phase-out - it is simply not included in state taxable income.

Missouri will eliminate taxes on Social Security benefits starting 2024, making all social security benefits tax free at the state level for those age 62 and older, regardless of income. Before 2024, benefits were partially taxed for higher earners.

While states like Rhode Island and South Carolina may still partially tax or tie exemptions to income requirements, Arkansas and Missouri both stand out regionally. Pennsylvania does not tax Social Security or pension income at the state level either, though its flat rate of 3.07% applies to other retirement income. Illinois exempts all retirement income from state income tax entirely.

Quick example: A 64-year-old couple receiving $50,000 per year of combined social security faces a $0 state tax bill on that income in both Arkansas and Missouri.

Once you look beyond social security - into private pension income, 401(k) distributions, and traditional IRA distributions - the Arkansas vs. Missouri difference becomes more meaningful.

Arkansas:

• Most pension and annuity income, 401(k) retirement distributions, and IRA distributions are taxable, but individuals age 59½ and older can claim a retirement income exclusion of up to $6,000 per taxpayer per year.

• A married couple filing jointly where both spouses have qualifying income can effectively shield up to $12,000 combined.

• No AGI-based income limits apply to this pension exclusion or annuity exclusion. If you qualify by age, you qualify.

Missouri:

• Private pensions, 401(k) distributions, and IRA distributions are generally taxed as ordinary income.

• Missouri offers a $6,000 subtraction for private pension income per taxpayer, but eligibility phases out above approximately $25,000 AGI for single filers and $32,000 for married filing jointly. Most retirees with a significant portion of other retirement income will exceed those thresholds.

• Government pensions and public pension income get more favorable treatment: Missouri exempts qualifying public pensions up to the maximum Social Security benefit amount with no AGI cap, effective since 2024.

Scenario: A 62-year-old in Benton County, Arkansas, takes $40,000 in annual 401(k) distributions plus Social Security. Social security is exempt. The first $6,000 of the 401(k) is sheltered by the retirement income deduction, leaving $34,000 subject to Arkansas's income tax brackets (top rate 3.9%). A 62-year-old in Jasper County, Missouri, with the same $40,000 in private retirement distributions likely exceeds the AGI threshold to claim Missouri's $6,000 subtraction, so all $40,000 may be taxed at rates up to 4.7%.

Roth IRA or Roth 401(k) qualified distributions are generally tax free at both federal and state levels and remain one of the most powerful tools to manage how much retirement income is taxed in either state.

Focusing only on whether states tax retirement income can be misleading. Retirees should think in terms of total tax burden - state and local taxes combined.

Property taxes:

• Arkansas's median effective property tax rate averages approximately 0.56%, with a typical annual bill around $1,113. Arkansas also has a homestead property tax credit for seniors aged 65 and older, plus assessed-value freezes in some counties - meaningful property tax relief for retirees on a fixed income.

• Missouri's property tax rate is moderate but generally higher than Arkansas. Missouri does offer a Property Tax Credit (Circuit Breaker) program for qualifying older homeowners. Still, Texas has no income tax but high property taxes at 1.40%, and New Hampshire has high property taxes despite no income tax - so the tradeoff between income tax and property taxes is common across states.

Sales taxes:

• Arkansas's state sales tax is 6.5%, but local sales taxes push the combined state and local sales tax rate to an average around 9.4% - one of the higher local sales tax rate figures in the region. The state sales tax rate applies to most taxable goods, though prescription drugs are exempt.

• Missouri's state rate is lower, but local add-ons can push combined rates above 8–9% in some communities. Day-to-day spending on taxable goods matters more for retirees who travel, dine out, or make large purchases like vehicles.

Checklist before you move:

• Compare typical property tax bills in your likely communities on each side of the line

• Look up the local sales tax rate in the specific city or county

• Identify whether your most important retirement income sources (pension, 401 k, IRA, annuity income) will be taxed differently in each state

• Factor in cost of living beyond just taxes - housing, healthcare, utilities

Neither state imposes a state estate tax or inheritance tax, which matters for estate planning. Nevada does not tax retirement income or have an estate tax either. For estates valued above the federal estate tax exemption (currently over $12 million per person), only federal estate tax applies in both Arkansas and Missouri.

If you live near Joplin or anywhere in the broader Four States region - northwest Arkansas and southwest Missouri - you already cross state lines without thinking about it. Retirement makes you think about it.

Scenario 1: A couple in their early 60s works in Missouri, building up a final 401 k there, but plans to establish their retirement domicile in Arkansas to take advantage of lower property taxes and the $6,000 retirement income deduction per person. Timing matters: when they claim Social Security, when they start pension income, and when required minimum distributions kick in at age 73 should all be mapped against which state they are domiciled in during each tax year.

Scenario 2: A retiree keeps a longtime home in Missouri but buys a lake property near Beaver Lake in Arkansas, spending several months a year there. This raises questions about statutory residency, domicile, and which state can tax retirement income. Part-year residency may trigger obligations in both states.

Both scenarios illustrate why shifting just 50–60 miles across the border may change the state tax bite on retirement distributions over a 20-year retirement - by tens of thousands of dollars.

To benefit from one state's tax policies, you must be legally domiciled there. Owning a vacation home or spending a few months a year across the line is not enough.

Domicile means your fixed, permanent home - the place you intend to return to. Factors both states may consider:

• Where your driver's license is issued

• Where you are registered to vote

• Where you spend the majority of nights

• Where your primary physician and financial advisors are located

A common rule of thumb is the 183-day rule: spending more than half the year in a state can establish residency there. A retiree who winters in Bella Vista, Arkansas, and summers near Joplin, Missouri, needs to track days carefully and document intent. Failing to do so can result in retirement income taxed in both states - or at least an unexpected state tax bill.

Any move across state lines should be coordinated with both a tax professional and a fiduciary financial advisor to ensure part-year or dual-state filing status requirements are handled correctly in the year of the move.

For people in their early to mid-60s, there is a critical planning window before required minimum distributions begin at age 73. What you do in this window shapes how retirement income is taxed at both federal and state levels for decades.

Roth conversions: Converting traditional IRA or 401(k) balances to Roth retirement accounts during low-income years - especially after leaving full-time work but before RMD age - can reduce future federal and state tax on retirement distributions in both Arkansas and Missouri. The retirement tax credit of paying a lower rate now to avoid a higher rate later is the core logic.

RMD timing: Delaying Social Security or pension income to your late 60s while carefully managing pre-RMD withdrawals may help smooth out taxable income and leverage Arkansas's $6,000 deduction or manage which Missouri income tax brackets you fall into. Missouri's new 100% capital gains subtraction after January 1, 2025, also creates planning opportunities for retirees selling appreciated assets.

Asset location: Higher-taxed assets (like taxable bond interest) may be better held inside retirement plans, while tax-advantaged or low-turnover investments could sit in taxable accounts. Both states treat capital gains as income for state purposes, though Arkansas's preferential 1.95% rate on capital gains is notably lower.

Revolutionary Wealth's planning process can model scenarios - such as converting $40,000 per year from age 62 to 65 while still in Missouri versus waiting until establishing Arkansas residency - to show how lifetime tax burden on most retirement income may change.

Revolutionary Wealth is a fiduciary, tech-driven, Arkansas-based financial advisory firm that specializes in integrated tax and retirement planning for high-net-worth pre-retirees and business owners. We manage over $100 million directly and advise on over $500 million annually as part of the Lion Street network.

We frequently work with clients in the Joplin and Four States region who are weighing Arkansas versus Missouri residency for retirement - including complex cases involving business exit planning, mixed pension income, multiple 401 k accounts, and the interplay of state and local taxes.

What we model for clients:

• Total tax burden in both states across income, property, and sales taxes

• Social Security timing and how it interacts with other retirement income

• Withdrawal sequencing from taxable, tax-deferred, and Roth retirement accounts

• Defined benefit or cash balance retirement plans for late-career business owners

• Collaboration with your CPA or attorney on estate and legacy strategies, including where appropriate, tools like fixed indexed annuities

If you are in your late 50s or 60s and considering a move across the Arkansas–Missouri line, we would welcome a conversation to review your retirement income, pension income, RMDs, and projected state tax exposure.

The best time to make decisions about Arkansas vs. Missouri residency is several years before retirement income starts flowing heavily - ideally in your early 60s, before Social Security, pensions, and RMDs are all running at once.

Practical checklist:

• Inventory current and future retirement income sources: Social Security, pension, 401(k), IRAs, taxable accounts, possible business sale proceeds

• Estimate how much of each source will be subject to state income tax in Arkansas vs. Missouri

• Review projected property taxes and local sales taxes in your likely communities

• Check filing status implications if you are single, divorced, or widowed versus married filing jointly

• If you spend time in other states - say, South Carolina, West Virginia, or South Dakota - coordinate multi-state planning to avoid surprises

States like Alaska have no personal income tax on retirement income. Florida does not tax any type of retirement income or pensions. Texas has no personal income tax, including on retirement income. New Hampshire has no state income tax on retirement distributions but does impose high property taxes. These comparisons can be useful benchmarks, but for most people in the Four States region, the real decision comes down to Arkansas versus Missouri - and the details matter more than the headlines.

The line between Arkansas and Missouri is just a road sign. The line between a good retirement plan and a great one is the work you do before you cross it.

These questions address common concerns not fully covered above, focused on practical issues for retirees in their 60s.

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