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08 Feb, Wednesday
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Bull Trader USA

Where Should I Retire?: We want to spend our retirement traveling on bicycles and need a low-tax ‘home’ for legal purposes. What’s the best home base for us?

Dear MarketWatch,

I have the opposite problem that most of your readers have, I don’t want to live anywhere. My partner and I want to start our retirement traveling. We already sold our home and next year plan on storing what few things we can’t part with and set off on the road. We are also selling our car and plan on traveling by bicycle.

We still need a “home” so we have a real address for bank accounts, investments and to renew state ID’ and passports. We could burden our children with this but they both live in states with income tax. Most of the advice I’ve seen resolves the address issue by using a mail forwarding service. The RV community seems to support many of these outfits. But I’m concerned that these services would be considered post boxes which are problematic for banks and government documents. Is there a legal way to be homeless and ideally in a state with no income tax?

Thanks,

B.R.

Dear B.R., 

What a unique and exciting situation. 

There are eight states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — that do not levy state income taxes, while New Hampshire doesn’t tax earned wages.

So your choices are quickly scaled down. 

After talking with some tax experts, it seems South Dakota might best fit the bill for all your needs. Of course there are some caveats and fine print to understand.

Read: How South Dakota became a haven for both billionaires and full-time RV-ers

When you have South Dakota residency, you’ll benefit from no intangible tax on investments, no pension tax, no personal property tax, no state tax on Social Security income and no state inheritance tax.

There are several businesses that can help you get a South Dakota address that’s a real address — not just a P.O. Box. In addition to mail scanning and forwarding services, these businesses can also be helpful with a number of things like starting the process for getting a driver’s license, registering to vote, getting insurance or opening an account with a South Dakota bank.

The businesses include Americas Mailbox in Box Elder, DakotaPost in Sioux Falls and the South Dakota Residency Center in Spearfish.

Not sure where to retire? Read our Where Should I Retire column

To start the process in South Dakota, get a personal mailing address at one of the mail-forwarding businesses. Then spend one night in the state and have documentation of your stay, such as a receipt for a campground or hotel. Then get a South Dakota driver’s license using both the address and the overnight stay receipt as documentation.

If you use a mail forwarding service, you will be required to complete a residency affidavit. The residency affidavit must be signed by a notary or South Dakota driver’s license examiner. It is used to obtain a driver’s license or state identification. You need to spend one every five years anywhere in South Dakota to obtain and renew your driver’s license. Your driver’s license is your main proof of residency.

To vote, your mailing address is both your residential and mailing address for voting. Each calendar year you must fill out an absentee ballot request form, indicating the elections you wish to vote in that year. About six weeks before election day you will receive the absentee ballot by mail.

It makes sense to transfer your bank accounts, doctors and other personal business to South Dakota to create connections to the state and to prove you’re not domiciled in a different state.

“Courts will look to the greatest number of connections to make sure you’re not connected to another state,” said Thomas Simmons, a professor of law at the Knudson School of Law at the University of South Dakota. 

Simmons said he couldn’t give a guarantee that you’ll be OK just going to South Dakota once every five years to renew your driver’s license.

“A physical presence on a fairly regular basis may be necessary. You can’t go to the state once, click these boxes and return once every five years. You need to be bona fide on your intent to return or another state may raise an issue,” Simmons said.

So the more connections you have to the state, the stronger your case is that you are a resident of the Mount Rushmore State and not another locale. Check with a tax expert or lawyer before committing to a relocation.

Of course, when you do go to South Dakota to handle your affairs, don’t forget to check out Mount Rushmore National Memorial, Badlands National Park and Wind Cave National Park. There’s plenty of other great state parks to explore, as well.

Good luck and happy travels.

Read more:

I’m done with Illinois! I want to retire in a small town in a neighboring state — so where should I go?

I want to retire in ‘a liberal-thinking area’ on $3,000 a month, including rent — where should I go?

I told friends I was moving to France for a year. It’s now 4 years later, and I’m building a house in this village of 1,200 people.

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