This guide answers the question "what are the best states to retire in financially" in plain terms. The best states to retire in financially depend on how taxes, healthcare costs, and housing prices interact with your specific nest egg. According to the [U.S.
Census Bureau](https://www.census.gov), roughly 4 million Americans turn 65 each year, yet most retirees underestimate how much their chosen state will silently drain from their savings. The problem is that a state with no income tax might still hammer you with property taxes or expensive utilities.
This guide breaks down the five financial factors that matter most, ranks states by affordability, and gives you a clear checklist to compare your own top candidates.
Why State Taxes Matter More Than You Think
State tax policy is the single largest variable you can control in retirement. While federal taxes apply everywhere, your state can take anywhere from zero to over 13% of your income depending on where you land.
Retirees often focus only on income tax, but a complete picture includes property tax, sales tax, and how the state treats Social Security and pension withdrawals.
The Tax Foundation's 2025 State Business Tax Climate Index reports that states like Wyoming, Nevada, and Texas have no state income tax at all. However, Texas balances this with some of the highest property tax rates in the country, averaging around 1.6% of home value annually.
A retiree with a $300,000 home in Texas pays roughly $4,800 per year in property taxes alone—a figure that can shock newcomers who moved for the zero income tax.
How to apply this: Pull your last three years of tax returns and calculate your effective tax rate in your current state, then compare it against the rates in your top three candidate states using a tool like SmartAsset's retirement tax calculator.
The Social Security Tax Trap
Nine states still tax Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, and Utah. However, most of these states offer exemptions based on income thresholds. For example, Missouri exempts Social Security entirely for single filers earning under $85,000, while Minnesota taxes benefits for individuals making more than $82,190.
Pension and IRA Withdrawal Rules
States vary wildly on how they treat retirement account withdrawals. Mississippi and Pennsylvania fully exempt pension income and IRA distributions from state tax, making them attractive for retirees with large 401(k) balances. Conversely, states like Rhode Island tax retirement income at your marginal rate, which can reach nearly 6%.
Before choosing where to settle, many retirees ask what are the best states to retire in financially because state tax rates vary so dramatically.
The answer to what are the best states to retire in financially often depends on whether your state taxes retirement income at all.
Healthcare Costs and Access: The Hidden Budget Killer
Healthcare is often the second-largest retirement expense, yet it rarely appears in state cost-of-living comparisons. The Commonwealth Fund's 2024 State Scorecard ranks states on healthcare accessibility, quality, and affordability. Hawaii, Massachusetts, and Vermont consistently rank in the top five for healthcare access, but they also carry higher overall living costs.
A 2024 report from Fidelity Investments estimates that an average 65-year-old couple will need approximately $315,000 for healthcare in retirement, not including long-term care. This figure rises dramatically in states with fewer Medicare Advantage options or higher out-of-pocket costs. Rural states like Mississippi and Arkansas often have fewer in-network providers, forcing retirees to travel long distances for specialist care.
How to apply this: Use Medicare's Plan Finder tool to compare Part D prescription drug plans in your candidate states, and check whether your preferred doctors accept Medicare patients there.
The Long-Term Care Gap
Long-term care costs vary by more than 50% across states. According to Genworth's 2024 Cost of Care Survey, a private nursing home room averages over $12,000 per month in Connecticut but drops to under $7,000 per month in Oklahoma.
If you plan to age in place, also consider that home health aide costs range from about $4,500 per month in Alabama to nearly $7,000 per month in Minnesota.
When healthcare costs spike, retirees often revisit what are the best states to retire in financially to protect their savings.
Access to quality care can shift the answer to what are the best states to retire in financially more than tax rates alone.
Housing and Property Taxes: Where Your Money Actually Goes
Housing represents the largest single expense in retirement, and property taxes follow you for decades. While a state like New Hampshire has no income tax, its median property tax rate of 1.85% is among the highest in the nation.
Conversely, Hawaii has a modest property tax rate of 0.37%, but the median home price exceeds $900,000, making it unaffordable for most retirees.
The key metric to examine is the effective property tax rate combined with median home prices. According to data from the National Association of Realtors, the most affordable states for homeownership in 2025 include West Virginia, Mississippi, and Ohio, where median home prices stay below $250,000 and effective property tax rates remain under 1%.
How to apply this: Calculate your annual property tax liability by multiplying the median home price in your target state by its effective tax rate, then compare this against your current annual housing costs.
Housing costs directly shape what are the best states to retire in financially, since property taxes recur every year.
A low income tax state may still fall short when asking what are the best states to retire in financially after property taxes are added.
The Complete Financial Comparison Table
| State | Income Tax Rate | Property Tax Rate | Median Home Price | Healthcare Rank | Action to Take |
|---|---|---|---|---|---|
| Texas | 0% | 1.60% | $310,000 | 34th | Budget for high property taxes |
| Florida | 0% | 0.83% | $390,000 | 30th | Compare insurance costs |
| Tennessee | 0% | 0.55% | $320,000 | 40th | Check Medicare Advantage options |
| Ohio | 2.77% | 1.41% | $220,000 | 22nd | Calculate income tax on withdrawals |
| Wyoming | 0% | 0.56% | $330,000 | 36th | Verify healthcare provider access |
This table helps you compare what are the best states to retire in financially at a glance.
Use the data to determine what are the best states to retire in financially for your specific situation.
Cost of Living vs. Quality of Life: What the Rankings Miss
The best states to retire in financially are not always the cheapest. A 2025 study from the Milken Institute's "Best Cities for Successful Aging" highlights that affordability must be balanced against access to amenities, transportation, and social engagement.
States like Iowa and Nebraska offer low costs but rank poorly on cultural opportunities and public transit, which can impact your quality of life as driving becomes more difficult.
One overlooked factor is utility costs. According to the U.S. Energy Information Administration, Louisiana and Mississippi have the lowest average electricity rates in the country, while Hawaii and Connecticut pay more than double those rates. A retiree in a 1,500-square-foot home might spend $150 per month on utilities in Louisiana but over $400 in Connecticut.
How to apply this: Create a weighted scoring system where you assign percentage values to taxes, healthcare, housing, and lifestyle factors, then rank your candidate states against each criterion.
Affordability alone cannot answer what are the best states to retire in financially if healthcare access is poor.
Quality of life measures often redefine what are the best states to retire in financially beyond raw cost data.
Frequently Asked Questions About what are the best states to retire in financially
How do I know if a state will tax my military pension?
Military pensions are treated differently across states. The Department of Veterans Affairs maintains a list of states that offer full or partial military pension exemptions. Currently, 38 states either fully exempt military pensions or provide significant deductions.
For example, Texas and Florida have no income tax, so military pensions are automatically untaxed, while states like California fully tax them at your marginal rate.
Military retirees frequently ask what are the best states to retire in financially because pension taxes vary widely.
Knowing your pension's tax status is essential when evaluating what are the best states to retire in financially.
What happens to my property taxes if I move to a state with no income tax?
States without income tax often compensate with higher property or sales taxes. Texas, for instance, has no income tax but relies heavily on property taxes, which average 1.6% of home value. A $250,000 home in Texas generates roughly $4,000 in annual property taxes. Always calculate your total tax burden across all categories rather than focusing on a single tax type.
Moving to a no-income-tax state can complicate what are the best states to retire in financially once property taxes rise.
You must compare total tax burden when deciding what are the best states to retire in financially.
Can I keep my current health insurance if I move to another state?
Medicare coverage generally transfers across state lines, but Medicare Advantage plans do not. If you have a Medicare Advantage plan, you will need to switch to a plan offered in your new state during the annual open enrollment period. Original Medicare with a Medigap policy is more portable, though Medigap premiums may change based on your new state's pricing structure.
Your Medicare Advantage plan may limit what are the best states to retire in financially if you move out of network.
Which states offer the best financial benefits for veterans?
Veterans should consider states with property tax exemptions for disabled veterans. According to the National Conference of State Legislatures, states like Florida, Texas, and Virginia offer significant property tax breaks for veterans with service-connected disabilities. Additionally, several states including Arizona and South Carolina exempt a portion of veterans' retirement income from state taxation.
Veteran-specific exemptions heavily influence what are the best states to retire in financially for former service members.
How much money do I need to retire comfortably in a low-cost state?
The amount varies significantly based on your lifestyle, but a general rule from financial planners suggests you need 25 times your annual expenses. In a low-cost state like Mississippi, where the median household spending for retirees is roughly $45,000 per year, you would need about $1.1 million.
In a high-cost state like California, annual spending often exceeds $70,000, requiring over $1.75 million.
A lower cost of living can change what are the best states to retire in financially by reducing the total nest egg required.
Conclusion
Finding the best states to retire in financially requires balancing multiple factors beyond just the sticker price of housing.
- Compare total tax burden across income, property, and sales taxes
- Research healthcare access and long-term care costs in each candidate state
- Calculate your personal annual expenses using realistic local data
- Use online calculators and official state resources to verify your assumptions
Your next step is to narrow your list to three states and spend a few weeks living in each one during different seasons. Renting first, rather than buying, gives you real-world experience with utility costs, healthcare access, and community fit before you commit your savings.
Run the numbers, visit your top choices, and make the move that protects both your wallet and your quality of life.
Ultimately, what are the best states to retire in financially depends on your total tax burden, healthcare access, and lifestyle priorities.
