When talking to those approaching retirement, there's a common question that comes up: "Illinois doesn't tax retirement income, so can I just settle here?"

It's partly true and partly false. Today, let's break this down from the perspective of those who own homes in suburbs like Glenview, north of Chicago.

First, the good news. Illinois exempts Social Security benefits from state income tax. This applies regardless of whether your income is high or low.

Withdrawals from qualified plans like 401(k), IRA, and Roth IRA are also not subject to state income tax. The same goes for public pensions, military pensions, and railroad retirement benefits.

This can be considered one of the most retirement-friendly systems in the country. Compared to neighboring states, it is definitely generous.

However, not all income is exempt. Investment income such as interest, dividends, and capital gains from stock sales outside of retirement accounts are still subject to a flat tax rate of 4.95%.

And federal taxes are separate. Just because the state doesn't collect them doesn't mean the IRS will let you off the hook, so don't get confused about this.

Now, let's talk about property taxes. Various studies show that Illinois has an effective property tax rate of 2.07%, ranking second in the nation after New Jersey.

In simple terms, the money saved from income tax often goes out the door through property tax bills. If you live in a high-value suburb, the impact is even greater.

I once heard a friend say, "Once my paycheck stopped, the property tax bill became the scariest thing." When you're working, it feels like just another expense, but it feels completely different when living on a fixed income.

That said, it's not something to ignore. Glenview is part of Cook County, so you can take advantage of the exemptions offered by the Cook County Assessor's office.

The first is the Senior Exemption. If you are a homeowner aged 65 or older, you can deduct $8,000 from the assessed value.

This is in addition to the general Homestead Exemption. There are no income limits, so if you qualify, you should definitely apply.

The second is the Low-Income Senior Freeze, commonly referred to as the Senior Freeze. This program locks in the assessed value of your home at a certain point in time.

The requirements are being 65 or older, living in your actual residence, and having a household income of $65,000 or less. For Cook County, the application for the 2025 tax year will consider income from 2024.

Many people overlook an important detail here. Social Security counts towards household income. Just because it's exempt from state income tax doesn't mean it's excluded here.

Also, the Senior Freeze must be reapplied for every year. Just because you did it once doesn't mean it's done, so keep that in mind.

The third is the Senior Citizens Real Estate Tax Deferral. This program allows you to defer part of your property tax until you sell your home or it is inherited.

Starting from the 2023 tax year, deferred taxes will accrue interest at a rate of 3% per year. The previous rate was 6%, so the conditions have improved.

However, this program ultimately places a lien on your home, so if you plan to pass it on to your children, it's best to discuss it with your family in advance. Applications can be made at the county Treasurer's office.

In my view, it's always disappointing that these programs often don't reach those who truly need them. There are more Korean seniors than you might think who are intimidated by English paperwork and just let it go.

While it's important to collect taxes fairly, I believe it's also the government's responsibility to properly inform people about available benefits. For now, we have to look out for each other.

So, what can you realistically do? Here's the order I recommend.

First, pull out your property tax bill for this year and check what exemptions are applied. They are listed item by item on the bill.

If something is missing, you can apply online through the Cook County Assessor's website. If you missed several years, you might be able to apply retroactively with a Certificate of Error.

If you feel that the assessed value is too high, consider filing an appeal. Comparing it to similar homes in your neighborhood can give you a good sense.

Finally, when deciding on a residence after retirement, don't just look at income tax; also consider property tax, insurance, and living expenses. The tax structure can vary greatly depending on personal circumstances, so be sure to check with a tax professional.

If it were me, I would take advantage of the retirement income tax exemption while ensuring I capture every possible property tax relief. The difference between those who know and those who miss out adds up year after year.