- When deciding where to retire, you should consider the state’s cost of living, tax friendliness, health care and Medicare options, weather, leisure activities and other lifestyle factors you deem important.
- While Original Medicare (Parts A and B) benefits are the same in every state, supplemental insurance (Medigap) and Medicare Advantage plans vary. Consider the quality of Medicare coverage when deciding where to retire.
- Make a list of what matters most to you. Living closer to family, being able to participate in your favorite hobbies and feeling safe in your surroundings are all viable factors in deciding where to retire.
Ranking the best and worst places to retire requires some research and a clear understanding of how you plan to spend your retirement years.
Choosing the right retirement locale for you should be included in your retirement planning.
Considering the cost of living, tax burden, health care options and overall quality of life can help you zero in on the best location for you.
Different organizations and publications provide different averages that rank states for retirement. But comparing data on different states — and balancing their rank with your priorities in retirement — may give you a much different “best state” to retire than any other list.
Best and Worst States for Cost of Living
Cost of living refers to the level of prices for everyday basic items — food, housing, transportation, taxes and health care. It varies from state to state and between cities and towns in each state and can have a big impact on the type of retirement lifestyle you can afford.
The most expensive places to retire include Hawaii, the Northeast and the West Coast. The Midwest and Deep South tend to be the least expensive retirement destinations, according to survey data from the Council for Community & Economic Research.
|Highest Cost of Living States||Rank||Lowest Cost of Living States||Rank|
|District of Columbia||2||West Virginia||43|
Because it takes in so many expenses, the cost of living plays the biggest role in how far you can stretch your retirement income. So choosing a state with a cost of living that fits into your retirement can help with your finances.
States Where Your Retirement Dollar Is Worth the Most and Least
By the time you retire, you realize a dollar doesn’t go as far as it used to. But it may go farther in some states than others because of differences in the cost of living from state to state.
The U.S. Bureau of Economic Analysis tracks this data, and if you crunch the numbers you can compare the purchasing power of a dollar in different states. In Maine, a dollar is worth a dollar. But it’s only worth pocket change in Hawaii, and you’ll get the most bang for your retirement buck in Mississippi.
|Best Value States||Value of a Dollar||Worst Value States||Value of a Dollar|
|West Virginia||$1.14||New Jersey||$0.87|
Multiplying your expected retirement budget by these numbers will let you get a feel for how much buying power your retirement income will have in different states.
Best and Worst States to Retire in for Taxes
Taxes can be a major financial factor in deciding where to retire, but it can be complicated figuring out what state’s tax burden may be the best or worst for you. You have to consider how different state and local taxes will affect your retirement income.
Several states have no income taxes and they often make it a big selling point to attract businesses, retirees and other people. But these states may make up for the lack of an income tax by having other, higher taxes.
“Income, property, and sales taxes all contribute to an individual’s overall tax burden, and every state finds a different balance between them,” Janelle Cammenga, a policy analyst at the tax policy-focused nonprofit Tax Foundation, told RetireGuide. “Many states also tax at least a portion of social security income.”
- State and local income taxes
- State and local sales taxes
- Property taxes
- How or whether a state taxes Social Security benefits
- State inheritance taxes
- State estate taxes
Several states have no income taxes and don’t tax your Social Security benefits. And while these may look like a good deal, they may have other taxes that take a sizable bite out of your income.
“For example, Tennessee may not tax wage or social security income, but it has average sales tax rates of over 9.5%.” Cammenga said. “Each person will have to decide what combination of taxes works best for him [or her].”
States with Highest and Lowest Income Tax Rates
Forty-three states and the District of Columbia have state income taxes. The top rates for each state vary widely — from a low of 2.9% in North Dakota to California’s high of 13.3%.
|State||Highest Rates||State||Lowest Rates|
|South Carolina||7%||North Dakota||2.9%|
If North Dakota’s 2.9% still looks too expensive for your tastes, there are seven states that have no income taxes.
- South Dakota
New Hampshire and Tennessee don’t have income taxes, but they are the only two states that tax interest and dividend income, which may be of interest if you’re counting on these investments for your retirement income. Tennessee has been phasing out this tax and will no longer impose it starting in 2021.
Best and Worst States for Health Care if You’re a Retiree
Utah is the healthiest state for seniors and Mississippi is the least healthy according to a 2021 survey by the United Health Foundation. The foundation publishes America’s Health Rankings each year.
The rankings use 34 measures to produce the foundation’s Senior Report, comparing how the states stack up to one another on health care for seniors. The measurements in the report are spread across five categories: individual behavior, community and environment, policy, clinical care, and all outcomes for health conditions.
In 2021’s report, the top-ranked states are spread around the country in the West and Northeast. Those that ranked the lowest were concentrated in the South.
|Best States||Rank||Worst States||Rank|
|New Hampshire||3||New Mexico||48|
States Ranked by Medicare Quality
While Original Medicare — Medicare Part A and Part B — are administered by the federal government and the same for all states, Medicare Advantage plans and Medigap policies may vary from state to state.
These plans are sold by private insurers that contract with Medicare. They are regulated by state insurance commissions instead of the federal government. You should also check your Medicare Advantage or Medigap plan to see if it will cover you when you move.
The quality of Medicare coverage may vary from state to state, according to U.S. News & World Report which ranks states on the quality of Medicare.
|Best States||Rank||Worst States||Rank|
States with the Best and Worst Quality of Life for Retirees
Quality of life may mean different things to different people. That makes it hard to quantify and rank states as best or worst.
Ballotpedia analyzed 19 different state comparisons — ranging from tax burden and business climate to health care and poverty rates — to give states an overall quality of life ranking. The rankings were based on an aggregate of 20 years of data in all 50 states.
|Best States||Rank||Worst States||Rank|
But your own tastes are a big part of determining how you’ll define “quality of life” in retirement. Just like financial and health care considerations, you should consider what you want out of life in retirement when you begin retirement planning.
Other Considerations When Planning to Retire
- The right climate for your taste isn’t simply about being comfortable or providing you with more activities you may enjoy. As you age, you become more susceptible to weather-related health problems. Read up on hot weather and cold weather risks and safety for seniors from the National Institute on Aging when researching places to retire.
- Retirement Travel Plans
- Make a bucket list of trips you want to take and consider a location with easy access to the transportation you’ll take. This may mean living close to a major airport to reduce the chance of connecting flights — and make it easier for others to visit. Or if you prefer frequent cruises, consider a place within an easy driving distance of a cruise ship terminal.
- Arts and Culture
- You can find a vibrant arts and culture scene in every region of the United States, according to the National Center for Arts Research at Southern Methodist University. The center publishes an annual Arts Vibrancy Index that ranks more than 900 communities in every American county. The best areas include metros as large as New York and “micropolitan” communities as small as Brookings, South Dakota.
As you narrow down your list of locations where you want to retire, you’ll be better able to research locales in your search area that offer the qualities that cater to your interests — whether they involve outdoor activities or arts and culture or travel opportunities.
Overall Best and Worst States for Retirement
What counts as the best and worst states for retirement can vary from person to person. Different retirees may prioritize different things. If sunny weather and no state income tax is important to you, then a state like Florida would probably stand out.
But if you’re more concerned about quality of life and cost of living, then Iowa, which ranks in the top 10 for both, may be a contender. But some states do stand out in both directions.
Florida is commonly considered a top destination for retirement due to its many appealing factors. The weather is warm year-round, the state features everything from major cities to small towns, and a large portion of the population is over 65. Florida ranks highly for Medicare and, of course, has no state income tax.
Depending on what you’re looking for, Virginia could be another state to consider. Virginia ranks in the top 11 for both quality of life and senior health care, while also having the third best value for a dollar. It also has one of the lowest tax rates in the nation.
On the flip side, many states may not make sense for retirement. Much of the deep South ranks near the bottom of the country in several key categories. Mississippi ranks dead last for both senior health care and quality of life, while states such as Arkansas, Louisiana and South Carolina are not far behind.
High-expense states can include high quality of life, but they may not make sense for retirement since your money won’t go far at all. This includes states such as New York, California and Hawaii.
|State||Cost of Living Rank||Senior Health Care Rank||Quality of Life Rank|
21 Cited Research Articles
- United Health Foundation. (2021). America’s Health Rankings. Retrieved from https://assets.americashealthrankings.org/app/uploads/2021-senior-report-%E2%80%93-state-summaries.pdf
- Waggoner, J. (2020, October 21). States with the Highest and Lowest Sales Tax Rates. Retrieved from https://www.aarp.org/money/taxes/info-2020/state-sales-tax-rates.html
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- U.S. Bureau of Labor Statistics. (2020, September 9). Consumer Expenditures – 2019. Retrieved from https://www.bls.gov/news.release/cesan.nr0.htm
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- Watson, G. (2020, August 5). What Is the Real Value of $100 in Your State? Retrieved from https://taxfoundation.org/price-parity-purchasing-power-100-state-2020/
- U.S. Bureau of Economic Analysis. (2020, May 18). Real Personal Income by State and Metropolitan Area, 2018. Retrieved from https://www.bea.gov/news/2020/real-personal-income-state-and-metropolitan-area-2018
- Hartman, R. (2020, January 8). How to Decide Where to Retire. Retrieved from https://money.usnews.com/money/retirement/baby-boomers/articles/how-to-decide-where-to-retire
- Hill, C. (2019, November 9). The Most Tax-Friendly U.S. State for Retirees Isn’t What You’d Guess – and Neither Is the Least Tax-Friendly. Retrieved from https://www.marketwatch.com/story/this-is-the-least-tax-friendly-state-in-america-for-retirees-and-surprise-its-in-the-midwest-2019-11-06
- Ziegler, B. (2019). Aging in America Rankings. Retrieved from https://www.usnews.com/news/best-states/rankings/aging
- Rapacon, S. (2018, May 14). The 20 Worst States for Your Retirement. Retrieved from https://www.kiplinger.com/slideshow/retirement/t006-s001-worst-states-for-retirement-2018/index.html
- Gobel, B. (2018, January 17). Best States to Retire. Retrieved from https://www.aarp.org/retirement/planning-for-retirement/info-2018/top-retirement-states-fd.html
- National Institute on Aging. (2018, January 1). Cold Weather Safety for Older Adults. Retrieved from https://www.nia.nih.gov/health/cold-weather-safety-older-adults
- Hayes, K. (2017, August 10). Best States for Health Care. Retrieved from https://www.aarp.org/health/healthy-living/info-2017/best-states-for-health-care-fd.html
- National Institute on Aging. (2016, June 15). Hot Weather Safety for Older Adults. Retrieved from https://www.nia.nih.gov/health/hot-weather-safety-older-adults
- National Assembly of State Arts Agencies. (n.d.). Funding. Retrieved from https://nasaa-arts.org/research/funding/
- Voss, Z.G., et. al. (n.d.). The Top 40 Most Arts-Vibrant Communities in America (2019). Retrieved from https://culturaldata.org/pages/arts-vibrancy-index-2019/
- Missouri Economic Research and Information Center. (n.d.). Cost of Living Data Series. Retrieved from https://meric.mo.gov/data/cost-living-data-series
- Ballotpedia. (n.d.). Who Runs the States, SQLI, About the Index. Retrieved from https://ballotpedia.org/Ballotpedia:Who_Runs_the_States,_SQLI,_About_the_Index
- Truth in Accounting. (n.d.). Government Finances and the “Quality of Life.” Retrieved from https://www.data-z.org/chart_of_the_week/fcdetail/government-finances-and-the-quality-of-life
- Organisation for Economic Co-operation and Development. (n.d.). Better Life Index; United States. Retrieved from http://www.oecdbetterlifeindex.org/countries/united-states/
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