Core Insights - Financial preparation for retirement is crucial to avoid stress during retirement years, with federal tax rules still applicable to retirees [2] - Certain states offer exemptions from state taxes on various forms of retirement income, including Social Security, 401(k)/IRA withdrawals, and pensions [4] State Tax Exemptions - Seven states provide exemptions for different forms of retirement income, while nine states have no state income tax, which also applies to retirement income [4] - Specific states and their tax exemptions include: - Arkansas: Up to $6,000 exempt annually from IRA distributions and pension plans for those over 59 1/2 [5] - Illinois: All retirement income is exempt [5] - Iowa: Social Security benefits are exempt, and distributions from retirement accounts and pensions are exempt after age 55 [5] - Mississippi: All retirement income is exempt, but early withdrawals are not [5] - New Hampshire: Social Security benefits and pension income are exempt, with some interest and dividends being phased out [5] - Pennsylvania: All retirement income is exempt [5] - South Carolina: Social Security benefits are exempt, with tax deductions available for retirement income based on age [6] States with No Income Tax - Nine states do not impose state income taxes, meaning distributions from Social Security and retirement accounts are not taxed [7]