The sleepy Village of Oak Creek boasts one grocer, several restaurants and a small outlet mall. But recently, the hamlet on the southern outskirts of Sedona earned new bragging rights. The Village of Oak Creek was just named Arizona’s No. 1 on SmartAsset’s list of “Most Tax Friendly Places for Retirees.”
Of the 10 Arizona communities designated as “tax friendly for retirees,” three other Northern Arizona communities make the list: Williamson (No. 2), Doney Park (No. 9) and New Kingman-Butler (No. 10).
The SmartAsset study, which aims to find areas with the most tax-friendly policies for retirees in all 50 states, looked at how the tax policies of each town would impact a retiree with a $50,000 income.
“SmartAsset is a financial technology company and our mission is to help people make big personal finance decisions by providing actionable advice on things like home buying, retirement and investing,” said AJ Smith of SmartAsset.
The survey calculates federal, state, county and local income taxes, effective property tax, sales tax, fuel tax based on miles driven per capita in each town, determines whether Social Security income is taxable and then creates an index weighted to denote the taxes that most affect retirees.
“The low property tax in Village of Oak Creek is a real benefit,” said Marc Sterling, principal at Sterling Financial Services LLC. “We attract retirees to Arizona because of weather, but I think that tax-friendliness is part of the reason they move here.”
The Sedona-based financial consultancy has so many retired clients in VOC (population less than 7,000) that they operate a satellite office in the area. “We have an office there to make it easy for our Village of Oak Creek clients. We also go to their homes. Sterling Financial Services sponsors a lot of events in the Village because many retirees are out and about at festivals,” he added.
Sterling believes that the Village of Oak Creek is also attractive to retirees because it offers the combination of the slow pace of a small town with “big city” services made possible because of the tourist market. Upscale restaurants, the Hilton Sedona Resort at Bell Rock and a plethora of activities draw visitors and retirees to the Village. Many of Sterling’s retired clients are active and spend time volunteering or working part-time jobs.
“The Village of Oak Creek is out of the way with red rock beauty and good services. It’s a small town with unincorporated development,” said the partner of Sterling Financial, which recently merged with Flagstaff-based Four Peaks Wealth Management. The companies, which offer tax planning as part of their financial services, have retained separate names after the merger.
Ron Getto, chief financial officer at Four Peaks Wealth Management, analyzed the nationwide study and reported, “Arizona may not rank at the top, but we do rank really well. People retire to Arizona for the weather and the low income tax rates. Some of the cities in Arizona stand out. But we’re really splitting hairs here. There are really close second and third places. I’m a math guy, and I see that only a few dollars separate the various entities.”
Although, Sterling Financial’s retired clients have an average income of around $90,000 per year, SmartAsset’s hypothetical retiree makes $50,000, getting Social Security benefits of $15K, $10K from a private pension, $15K from retirement savings such as a 401(k) or IRA and $10K in wages. In comparison, the median household income in VOC was $63K in 2015, according to City-Data.com.
“In America, over half of the retirees only have Social Security; in Village of Oak Creek they have multiple income sources that would bring them above the $50K,” explained Sterling. “We work to try to look at individual clients needs and look into the future, so when they get to that time [of retirement], they have a good income,”
“We put together a portfolio that is tax-efficient for the needs of the retiree,” added Getto.
“We hope people hear about our study and consider their own retirement and tax situation,” concluded Smith, managing editor at SmartAsset. “We want to inspire people to empower themselves with knowledge. This can help people gain a better understanding of how where they live in retirement will affect their financial situation.”
SmartAsset, an online source of free information across financial topics, offers an online interactive map, which highlights the places in the U.S. with tax policies most favorable to retirees. Readers can zoom between states and the national map to see the most tax-friendly places in each part of the country.
By Stacey Wittig, FBN
#1 Village of Oak Creek (Big Park), AZ
Income Tax Paid $5,846
Property Tax Rate 0.60%
Sales Tax Paid $865
Fuel Tax Paid $120
Social Security Not Taxed
Retirement Tax Friendliness Index 65.09
Four Peaks Wealth Management
809 W Riordan Road, Suite 206, Flagstaff
Sterling Financial Services, LLC
1865 West SR 89A, Ste. C, Sedona