Complete Planning Guide · 2026
Retirement Planning in Minnesota: What Professionals Need to Know
Minnesota has its own rules for taxing Social Security, pensions, and estates that can significantly affect how much you keep in retirement. This guide covers what makes Minnesota different and how to build a retirement strategy designed for it.
Minnesota vs. The National Picture
What Makes Retirement Planning Different in Minnesota?
Retirement planning in Minnesota differs from national planning in four critical ways: the state taxes Social Security income (though partial exclusions exist for qualifying retirees), certain public pension income qualifies for a state subtraction, senior homeowners may qualify for a property tax refund program, and Minnesota's estate tax threshold is $3 million — far below the 2026 federal exemption of approximately $13.6 million. For professionals who have spent decades accumulating wealth, these distinctions are not minor footnotes. They can materially affect your take-home income in retirement and what you leave to your family.
At New Horizons Boutique Financial Services, our team — including Lars Engman, MBA and Alec Engman, B.S. Economics (University of Minnesota) — builds retirement strategies specifically accounting for Minnesota's tax environment. The goal is always a plan built around your situation, not a generic template. Results vary by individual circumstances, and tax rules may change — which is why ongoing planning matters.
Explore our Financial Independence Planning approachSocial Security Is Taxed at the State Level
Minnesota is one of a minority of states that taxes Social Security benefits. However, qualifying retirees below certain income thresholds may be eligible for a partial subtraction. A strategy-first approach aims to manage income levels in ways that may preserve eligibility for these exclusions, though results vary.
Pension Income Exclusions May Apply
Minnesota allows a subtraction for a portion of public pension income (such as PERA and TRA), subject to eligibility rules and income phase-outs. Private pension income does not qualify for the same exclusion, making account type and income source a key planning variable.
Senior Property Tax Refund Program
Minnesota homeowners age 65 and older who meet income guidelines may qualify for the Senior Citizens' Property Tax Deferral program or the Homestead Credit Refund. These programs can meaningfully reduce housing costs in retirement and should be reviewed as part of a comprehensive income plan.
Minnesota Estate Tax Starts at $3 Million
Minnesota's estate tax exemption for 2026 is approximately $3 million per individual — significantly below the federal threshold. For professionals with accumulated assets, a retirement plan that ignores estate tax exposure may leave a substantial and avoidable tax burden for heirs. Estate planning coordination is a key component of a complete retirement strategy.
Key Numbers Minnesota Retirees Should Know in 2026
Sources: IRS, Minnesota Department of Revenue, Social Security Administration (2026)
$3M
Minnesota estate tax exemption (vs. ~$13.6M federal)
9.85%
Minnesota's top marginal income tax rate for 2026
$23,500
2026 401(k) contribution limit (plus $7,500 catch-up if age 50+)
67
Full Social Security retirement age for those born 1960 or later
Income Planning
How Much Do You Actually Need to Retire in Minnesota?
There is no single correct answer — but there are well-established frameworks for thinking through the question. Answering the question of how much do I need to retire depends on your desired lifestyle, income sources, tax exposure, healthcare costs, and how long your plan needs to last. Below are three widely referenced frameworks, followed by the Minnesota-specific adjustments every professional should factor in.
| Framework | What It Says | Minnesota Consideration |
|---|---|---|
| The $1,000/Month Rule | For every $1,000/month of retirement income you want, you may need approximately $240,000 saved (based on a roughly 5% withdrawal assumption). This is a planning approximation, not a guarantee. | Minnesota state income tax on withdrawals may reduce net monthly income, requiring a larger gross savings target to achieve the same after-tax result. |
| The 30/30/30/10 Rule | A general allocation framework: roughly 30% of retirement income from savings, 30% from Social Security, 30% from pensions or other guaranteed income, and 10% flexibility. Proportions vary widely by individual situation. | With Minnesota taxing both Social Security and most pension income, the effective "30% + 30%" may shrink, putting more weight on the savings bucket and tax-efficient planning. |
| The 60/30 Rule (MN Context) | In some discussions, a "60/30" framework refers to targeting 60% of pre-retirement income from investment assets and 30% from Social Security. This ratio is illustrative and depends heavily on your personal savings rate and timeline. | Minnesota's progressive tax structure means high earners should model after-tax income, not just gross income targets, when stress-testing whether they are truly ready. |
| Retiring on $80,000/Year at 60 | To produce $80,000/year in gross income for 30+ years, a common planning starting point is approximately $1.6M to $2M in invested assets, depending on investment returns, Social Security timing, and inflation. These are illustrative ranges, not projections. | At age 60, Social Security is not yet available and Medicare doesn't start until 65, creating a 5-year bridge period with elevated healthcare and tax exposure that a Minnesota-specific plan needs to address. |
All figures are illustrative planning benchmarks. Actual outcomes depend on individual circumstances including investment returns, tax treatment, healthcare costs, and longevity. Consult a qualified financial advisor for personalized guidance.
Planning Timeline
Your Minnesota Retirement Planning Checklist
Professionals who retire with confidence typically work through a structured sequence of decisions, not all at once. This timeline reflects the planning approach used by Lars Engman, MBA and the New Horizons team for executives and professionals navigating the transition from career to financial independence.
If you're unsure where you stand on any of these steps, that's exactly the kind of clarity a first conversation is designed to provide. There's no cost and no obligation.
Schedule a Consultation10+ Years Out: Build the Foundation
Maximize contributions to 401(k), IRA, and HSA accounts. Clarify your target retirement income. Begin Roth conversion analysis given Minnesota's high marginal rates. Identify whether pension income or Social Security will play a meaningful role in your plan.
5-10 Years Out: Model the Transition
Project your retirement income from all sources. Model Minnesota's tax impact on Social Security and withdrawals. Stress-test your plan for healthcare coverage for early retirees in the 60-65 bridge period. Evaluate estate tax exposure given the $3M Minnesota threshold. Review beneficiary designations and insurance coverage.
1-3 Years Out: Finalize the Strategy
Confirm your Social Security claiming strategy. Establish a tax-efficient withdrawal sequence across account types. Finalize Medicare enrollment timing. Review the Senior Property Tax Deferral and Homestead Credit Refund eligibility. Confirm your investment allocation is appropriate for distribution — not just accumulation.
At Retirement: Activate the Income Plan
Shift from accumulation to distribution mode. Begin drawing from accounts in the tax-efficient sequence you planned. Set up required minimum distribution (RMD) tracking. Conduct annual reviews to adapt your strategy as tax law, income, and spending evolve. See our guide to retirement income distribution planning for a deeper look at sequencing income sources in retirement.
Tax Strategy
Minnesota Tax Considerations for Retiring Professionals
Minnesota's tax environment is one of the most important variables in any retirement plan built for this state. Understanding how each income source is taxed — and how to sequence withdrawals thoughtfully — can meaningfully reduce your tax burden over the course of retirement. Individual outcomes vary based on income, filing status, and applicable law at the time of withdrawal.
Social Security Income
Minnesota taxes Social Security benefits for residents above certain income thresholds. A partial subtraction may be available for qualifying lower-income retirees. Coordinating your other income sources to manage your Minnesota adjusted gross income can affect how much of your Social Security is subject to state tax. See our detailed overview of Minnesota state taxes on retirement income.
Eligibility for the subtraction is income-dependent and subject to change by the legislature.
IRA and 401(k) Withdrawals
Traditional IRA and 401(k) withdrawals are taxed as ordinary income in Minnesota, subject to the state's progressive rates ranging from 5.35% to 9.85% as of 2026. Roth IRA withdrawals that meet federal qualified distribution requirements are not subject to Minnesota income tax, which is a significant long-term planning advantage for high earners.
Estate Planning Exposure
Minnesota's approximately $3 million estate tax exemption for 2026 means that professionals with accumulated assets — including real estate, retirement accounts, business interests, and investment portfolios — may be subject to state estate tax even when their estate falls well under the federal threshold. Coordinating estate planning with your retirement strategy is essential for those with meaningful assets.
Social Security Strategy
When Should You Claim Social Security in Minnesota?
The timing of Social Security benefits is one of the highest-stakes decisions in retirement planning. Claiming at 62 permanently reduces your monthly benefit by up to 30%. Waiting until age 70 may increase your monthly benefit by approximately 8% per year beyond full retirement age, though actual results depend on your earnings history and factors specific to your situation.
For Minnesota residents, the claiming decision carries an additional layer: delaying Social Security may reduce the amount of benefits subject to state income tax if your income stays below the applicable exclusion threshold during the bridge years. A coordinated strategy between Social Security timing, retirement account withdrawals, and Roth conversions can help manage this exposure. Learn how our team helps professionals find this kind of clarity.
| Claiming Age | Impact on Benefit | Minnesota Tax Note |
|---|---|---|
| Age 62 | Up to 30% permanent reduction vs. full retirement age | Lower benefit may still be taxable at state level depending on total income |
| Age 67 (FRA) | 100% of your calculated benefit | Full benefit may push income above MN exclusion threshold depending on other income sources |
| Age 70 | Up to 24% increase over full retirement age benefit | Higher benefit maximizes income but also maximizes state tax exposure if above threshold |
Table is illustrative. Actual Social Security benefits depend on your individual earnings record. Minnesota tax treatment is subject to legislative change. Consult a qualified advisor.
Who We Serve
Retirement Planning Built for Minnesota Professionals
New Horizons Boutique Financial Services intentionally limits the number of clients it serves. Every client works directly with a financial advisor — Lars Engman (MBA), Alec Engman (B.S. Economics, University of Minnesota), or another member of our team — rather than being passed to a junior associate. This is a deliberate design choice, not a marketing promise.
Executives Nearing Retirement
Professionals planning a confident transition from career to financial independence, with complex compensation, deferred income, and estate planning considerations. Learn more about working with a financial advisor for executives nearing retirement.
Professionals Seeking Clarity
Individuals who want a clear picture of where they stand financially and what decisions they need to make — without being pushed toward products before a strategy is in place.
Learn moreBusiness Owners Exiting
Business owners planning a strategic exit who need to coordinate liquidity events, tax implications, and what their financial life looks like after the sale. Learn more about business owner exit planning in Minnesota.
People Pursuing Financial Freedom
Private equity associates, corporate leaders, and individuals developing a long-term strategy designed to create flexibility, security, and opportunity — whether retirement is five years away or twenty.
Wealth management in Lake ElmoOur Approach
Strategy First. Products After.
Many professionals reach out to a fee-only financial advisor and receive a product recommendation before they've ever had a complete picture of their retirement strategy. At New Horizons, no recommendation is made until a full financial planning strategy has been developed — covering income, investments, taxes, cash flow, debt, insurance, and estate planning together. While some wonder about potential downsides of a fiduciary advisor, the alignment of interest is typically the key benefit. Working with a fiduciary financial advisor in Minnesota ensures that strategy is built in your best interest. If you're based in the east Twin Cities area, our fiduciary financial advisor in the east Twin Cities serves clients in Lake Elmo, Stillwater, and surrounding communities. For those in the north metro, our financial advisor in Anoka County, MN is also available. And in Minneapolis, our financial advisor serves professionals across the metro's core. And in St. Paul, our financial advisor serves Minnesota's capital. Our wealth management services in Minneapolis round out this regional coverage. For broader wealth management across Minnesota, the same integrated approach applies.
This matters in retirement planning because the decisions are deeply interconnected. When you claim Social Security affects your Minnesota income tax exposure. When you convert to a Roth affects your estate. When you draw down taxable accounts affects your Medicare premium. A strategy that looks at each decision in isolation may optimize one variable while inadvertently creating problems elsewhere.
Understand the difference between a fiduciary advisor and a brokerClient count is intentionally limited so every relationship receives full attention.
Every plan is fully tailored to the client's goals, timeline, and situation. No off-the-shelf solutions.
Ongoing partnership with regular strategy reviews as life, goals, and tax law evolve.
Clients are kept fully informed about every strategy and decision shaping their financial future.
You work directly with your advisor throughout the relationship — not a call center or rotating associate team.
Common Questions
Frequently Asked Questions About Retirement Planning in Minnesota
Answers to the questions professionals ask most often when evaluating their retirement readiness in Minnesota.
What is the $1,000 a Month Rule for retirement?
The $1,000 a month rule is a planning approximation that suggests you may need approximately $240,000 in savings for every $1,000 per month of retirement income you want to generate (based on a roughly 5% annual withdrawal rate). For example, if you want $5,000 per month in retirement income from your savings, the rule implies you may need around $1.2 million saved. This is a general benchmark, not a guarantee — actual results depend on investment returns, inflation, longevity, and your individual tax situation. In Minnesota, state income taxes on withdrawals can reduce your net monthly income, which may require a higher gross savings target to achieve the same after-tax result.
What is the 60/30 rule in Minnesota?
The 60/30 rule, in the context of Minnesota retirement planning, is sometimes used to describe a target income allocation where approximately 60% of retirement income comes from investment assets and savings, and roughly 30% comes from Social Security, with the remaining portion from pensions or other income sources. The specific proportions vary widely by individual situation. In Minnesota, this framework requires adjustment because both Social Security and most pension income are subject to state income tax, which can reduce the effective income from those sources and make the savings bucket more important to the overall plan.
What is the 30/30/30/10 rule?
The 30/30/30/10 rule is a general income allocation framework sometimes used in retirement planning discussions. It suggests that a balanced retirement income plan might draw roughly 30% from personal savings and investments, 30% from Social Security, 30% from pension or guaranteed income sources, and keep 10% as a flexible buffer for unexpected costs or adjustments. This framework is illustrative — real plans vary significantly based on individual savings rates, career history, and income levels. For Minnesota residents, the tax treatment of Social Security and pension income by the state reduces the effective value of those two 30% buckets, which may require higher savings accumulation or adjusted income strategies to compensate.
How much do I need to retire on $80,000 a year at 60 in Minnesota?
To generate approximately $80,000 per year in gross retirement income starting at age 60, a common planning starting point is accumulating roughly $1.6 million to $2 million in invested assets — though the actual amount needed depends heavily on your expected investment returns, inflation assumptions, Social Security timing, and longevity. Retiring at 60 in Minnesota introduces specific challenges: Social Security is not available until age 62 at the earliest (and claiming early reduces lifetime benefits), Medicare coverage doesn't begin until age 65, and during this bridge period all withdrawals from traditional retirement accounts are subject to Minnesota income tax at rates up to 9.85%. These factors can increase the total assets needed to sustain $80,000 per year on an after-tax basis. Working through a detailed projection with a qualified advisor is the most reliable way to answer this question for your specific situation.
What is the Rule of 90 in Minnesota?
The Rule of 90 in Minnesota is a pension eligibility provision used by certain public employee retirement systems in the state, most notably PERA (Public Employees Retirement Association). Under the Rule of 90, a member becomes eligible for an unreduced pension when their age plus years of service equal 90. For example, a member who is 60 years old with 30 years of service (60 + 30 = 90) may qualify for full pension benefits without the early retirement reduction that would otherwise apply. Specific eligibility rules, benefit formulas, and exceptions vary by pension plan and employment classification. If you are a Minnesota public employee planning retirement, confirming your specific plan rules with PERA or your employer's HR department is the appropriate first step.
What are the biggest mistakes people make when retiring?
The most common retirement planning mistakes include: (1) Claiming Social Security too early without modeling the lifetime trade-off; (2) Underestimating healthcare costs, especially in the gap between early retirement and Medicare eligibility at 65; (3) Failing to account for state income taxes in Minnesota, which tax Social Security, IRA withdrawals, and most pension income; (4) Drawing down accounts in an unplanned sequence that accelerates tax exposure; (5) Overlooking Minnesota's $3 million estate tax exemption, which can create a significant tax event for families with accumulated assets; (6) Not revisiting the plan after major life changes or legislative updates; and (7) Retiring without a written income strategy — relying on a savings balance rather than a structured income plan. Many of these mistakes are avoidable with a comprehensive retirement strategy built before the transition, not after.