Can a Couple Retire in Burlington, Vermont, at 66 on $1.3 Million? Vermont’s Tax on Social Security Depends on Their Income
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Burlington, Vermont, with its waterfront bike path along Lake Champlain, is well worth including in plenty of couples’ retirement plans, and the question that follows is practical. Can a couple at 66 with $1.3 million find Burlington affordable, and how much of their Social Security will Vermont tax? Burlington may be affordable if they already own their home mortgage-free, but the rest of the answer depends on their taxes and spending. The tax answer comes down to one number they can manage every year.
What $1.3 Million Buys on Lake Champlain
The SSA’s estimated average for an aged couple both collecting benefits is $3,355 a month after the 3.6% COLA in 2027, or $40,260 a year. A 4% first-year withdrawal, a standard starting rate for a 30-year horizon, pulls $52,000 from the portfolio. Together that’s $92,260, or about $7,690 a month.
Two costs come off the top. Downtown Burlington’s median home sold for about $375,000, and at the city’s current homestead property tax rate of 2.46%, a home at that assessed value would cost about $768 a month. Medicare Part B costs $202.90 per person, so $405.80 for the two of them.
That leaves roughly $6,516 a month for heating oil, groceries, Medigap and Part D, cars, home repairs, travel, and a reserve fund. That’s close to the national average household spend of $81,905 a year, or about $6,825 a month. It’s comfortable, though it won’t feel plush.
Burlington offers the lake, the University of Vermont Medical Center right in town, a walkable downtown, and ski mountains within easy reach. On the cost side, the Tax Foundation ranks Vermont 43rd overall and 49th on property taxes. Burlington’s sales tax is 7%.
Winters are long, heating bills are uneven, and the small airport often means connecting flights. Area home prices are up 48.88% over five years. Meanwhile, inflation for Americans 62 and older ran 3.9%, a bit ahead of the latest COLA.
Where Vermont’s Social Security Line Actually Falls
Joint filers keep all of their Social Security out of Vermont tax with federal adjusted gross income (AGI) up to $70,000. The exemption phases out above that and is gone at $80,000. AGI includes the federally taxable portion of Social Security, so every IRA dollar counts twice: once on its own and again by pulling more of the benefit into AGI.
| $52,000 draw mix | Federal AGI | Vermont treatment |
|---|---|---|
| All traditional IRA | $81,910 | Fully taxed |
| $47,000 IRA, $5,000 Roth or cash | $72,660 | Partly taxed |
| $40,000 IRA, $12,000 Roth or cash | $59,710 | Fully exempt |
In the all-IRA case, $29,910 of benefits becomes taxable. Even at Vermont’s 3.35% starting rate, that’s about $1,000 a year for the same spending. Vermont’s rates run up to 8.75%, and IRA withdrawals get no special break. The federal senior deduction of $6,000 per spouse lowers taxable income, but it doesn’t lower AGI, which Vermont’s test uses.
Pressure Points a Decade Out
Required minimum distributions start at 75 for this age group, beginning in 2035. After that, traditional IRA withdrawals are no longer optional. Roth balances face no lifetime RMDs, so the years from 66 to 75 offer room to convert some IRA money while managing where income lands relative to the line. Medicare surcharges don’t start until joint income passes $218,000, so they’re a distant concern.
Vermont’s estate tax threshold is $5 million and isn’t indexed for inflation. That’s far above this couple’s assets. Vermont’s homestead property tax credit also depends on household income, which counts Social Security, so the same income management can help there too.
Verdict on the Burlington Plan
The plan works if the house is already paid for. With $1.3 million, a 4% starting withdrawal of $52,000 raised with inflation, a diversified stock-and-bond mix, and about $40,260 in Social Security, the couple has roughly $92,260 a year to spend. Buying a home out of the portfolio would reduce every number above.
If one spouse delays past 66 to claim, the bigger check raises lifetime income, but it also drives more benefit into AGI. The number to manage every year is federal AGI against Vermont’s $70,000 full-exemption line. Under these assumptions, drawing about $12,000 of each year’s withdrawal from Roth or cash, and building a Roth reserve before RMDs arrive, keeps AGI under that line.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
