Where you retire matters as much as how much you've saved. State taxes, cost of living, healthcare access, and quality of life vary dramatically—choosing wisely can save you $10,000-$30,000+ per year. This guide breaks down the most tax-friendly states for retirees, compares cost of living across regions, and helps you weigh financial benefits against lifestyle preferences to find your ideal retirement destination.
Key Takeaway
Moving from a high-tax state (like California or New York) to a no-tax state (like Florida or Texas) can save a retiree with $100k annual income $5,000-$10,000/year in state taxes alone—$100,000-$200,000+ over a 20-year retirement.
The 9 States With No Income Tax
These states don't tax wages, Social Security, retirement account withdrawals, or investment income:
- Alaska - No income tax, but high cost of living and harsh climate
- Florida - No income tax, no estate tax, warm weather—most popular retirement destination
- Nevada - No income tax, low property taxes in rural areas, dry climate
- South Dakota - No income tax, low cost of living, but cold winters
- Tennessee - No income tax (eliminated "Hall Tax" on investment income in 2021), low cost of living
- Texas - No income tax, but higher property taxes; diverse geography and climate
- Washington - No income tax, but high sales tax and expensive real estate near Seattle
- Wyoming - No income tax, low population density, rural, cold winters
- New Hampshire - No income tax (but taxes interest/dividends over $2,400 until 2025), high property taxes
Key Takeaway
"No income tax" doesn't always mean "low taxes overall." Texas and New Hampshire have high property taxes, and Washington has high sales taxes. Look at total tax burden (income + property + sales) when comparing states.
States That Don't Tax Social Security
38 states don't tax Social Security benefits, even if they're taxable at the federal level. This is critical since Social Security is often the largest income source in retirement.
States That DO Tax Social Security (12 states)
- Full taxation: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, West Virginia
- Partial taxation: Kansas, Missouri, Nebraska (with income thresholds or exemptions)
Impact: If you receive $30,000/year in Social Security and live in Connecticut (5% top rate), you could pay $1,500/year in state tax on SS alone—$30,000 over 20 years.
States That Don't Tax Retirement Account Withdrawals
A handful of states fully or partially exempt IRA/401k distributions from state income tax:
- Illinois - Doesn't tax retirement account distributions (but taxes other income at 4.95%)
- Mississippi - Fully exempts retirement income, including IRA/401k withdrawals
- Pennsylvania - Doesn't tax IRA/401k/pension income (but 3.07% on wages/investment income)
Many states offer partial exemptions:
- Alabama - Up to $6,000 pension exemption
- Georgia - $65,000 retirement income exemption if 65+
- South Carolina - Up to $10,000 retirement income deduction
Total State Tax Burden Comparison
To truly compare states, look at combined state and local taxes (income + property + sales):
Lowest Total Tax Burden States (as % of income)
| State | Total Tax Burden | Notes |
|---|---|---|
| Alaska | 5.2% | No income/sales tax, oil revenue subsidizes budget |
| Tennessee | 5.8% | No income tax, low property tax, moderate sales tax |
| Wyoming | 6.3% | No income tax, low property tax, low population |
| Florida | 6.5% | No income tax, moderate property/sales tax |
| South Dakota | 7.0% | No income tax, low property tax |
Highest Total Tax Burden States (as % of income)
| State | Total Tax Burden | Notes |
|---|---|---|
| New York | 12.5% | High income tax (up to 10.9%), high property tax |
| Connecticut | 12.4% | High income tax, high property tax, taxes SS |
| Hawaii | 12.2% | High cost of living, high taxes across the board |
| California | 11.5% | High income tax (up to 13.3%), high sales tax |
| New Jersey | 11.4% | High property tax, high income tax |
Tax Savings Example: NY to FL
Retiree with $100k annual income ($40k Social Security, $60k IRA withdrawals):
- New York: $6,500/year state income tax + $8,000 property tax = $14,500/year
- Florida: $0 state income tax + $3,500 property tax = $3,500/year
- Annual savings: $11,000/year
- 20-year savings: $220,000 (not counting investment growth of saved taxes)
Key Takeaway
State tax differences compound dramatically over a 20-30 year retirement. Moving from a high-tax to low-tax state is like giving yourself a 5-10% raise on all retirement income.
Cost of Living Beyond Taxes
Taxes are only part of the equation—housing, healthcare, groceries, and utilities vary widely:
Most Affordable States (Overall Cost of Living)
- Mississippi - 15% below national average; low housing costs, exempts retirement income
- Arkansas - 14% below average; low housing, no SS tax
- Alabama - 13% below average; low taxes, warm climate
- Oklahoma - 12% below average; low housing costs
- Tennessee - 11% below average; no income tax, growing cities (Nashville, Memphis)
Most Expensive States (Overall Cost of Living)
- Hawaii - 86% above national average (highest in US)
- California - 38% above average; housing drives costs
- Massachusetts - 34% above average; high housing and healthcare
- New York - 26% above average; NYC skews state average
- Washington - 23% above average; Seattle area very expensive
Housing Costs: The Biggest Variable
Median home values (2025):
- California: $760,000
- New York: $430,000
- Florida: $410,000
- Texas: $320,000
- Tennessee: $310,000
- Mississippi: $180,000
- West Virginia: $150,000
What this means: Selling a $700k CA home and buying a $300k TN home frees up $400k in equity—enough to generate $20k/year in additional retirement income at 5% return.
Property Taxes by State
Property taxes are often retirees' largest housing expense after the mortgage is paid off:
Highest Property Tax States (effective rate on home value)
- New Jersey: 2.23% - $8,900/year on $400k home
- Illinois: 2.05% - $8,200/year on $400k home
- New Hampshire: 2.00% - $8,000/year on $400k home
- Connecticut: 1.96% - $7,840/year on $400k home
- Texas: 1.60% - $6,400/year on $400k home
Lowest Property Tax States (effective rate)
- Hawaii: 0.28% - $1,120/year on $400k home
- Alabama: 0.37% - $1,480/year on $400k home
- Louisiana: 0.51% - $2,040/year on $400k home
- South Carolina: 0.53% - $2,120/year on $400k home
- West Virginia: 0.54% - $2,160/year on $400k home
Senior exemptions: Many states offer property tax breaks for seniors (age 65+), often based on income:
- Florida: Additional $50k homestead exemption for 65+
- Georgia: School tax exemption for 62+ (saves ~$1,500-$2,500/year)
- Texas: $10k additional exemption for 65+
Estate and Inheritance Taxes
If you plan to leave assets to heirs, estate taxes matter:
States With Estate Tax (Deceased's Estate)
- Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington
- Exemption amounts: Vary from $1M (Oregon) to $13M+ (matching federal exemption)
States With Inheritance Tax (Heirs Pay)
- Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania
- Rates: Typically 0-18% depending on relationship to deceased and amount inherited
- Exemptions: Most states exempt spouses; some exempt children
Tax-free states: The remaining 38 states (including FL, TX, NV, TN) have no estate or inheritance tax beyond federal limits ($13.61M in 2025).
Top Retirement States by Category
Best for Taxes
- Florida - No income tax, no estate tax, moderate property tax, homestead exemption
- Nevada - No income tax, no estate tax, low property tax (outside Vegas)
- Tennessee - No income tax, low property tax, low cost of living
- South Dakota - No income tax, no estate tax, very low overall taxes
- Wyoming - No income tax, no estate tax, low property tax
Best for Cost of Living + Taxes
- Tennessee - Low taxes, low cost, growing cities, warm climate
- Alabama - Very low cost, low taxes, Gulf Coast beaches
- Mississippi - Lowest cost of living, exempts retirement income
- Arkansas - Low cost, low taxes, natural beauty
- South Carolina - Low property tax, mild climate, coastal charm
Best for Quality of Life (Taxes + Healthcare + Lifestyle)
- Florida - Great weather, no taxes, excellent healthcare, vibrant senior communities
- Arizona - Low taxes, warm climate, good healthcare, active lifestyle
- North Carolina - Mild climate, affordable, good healthcare, mountains and beaches
- Colorado - Outdoor lifestyle, good healthcare (but higher cost of living and taxes SS)
- South Carolina - Low cost, low taxes, beaches, golf courses
States to Avoid for Retirees (High Taxes + High Cost)
- California - Top income tax 13.3%, high cost of living, high housing costs
- New York - High income/property tax, estate tax, expensive (except upstate)
- New Jersey - Highest property taxes in US, inheritance tax, estate tax
- Connecticut - High taxes, taxes Social Security, estate tax
- Illinois - High property taxes, budget issues, estate tax
Exception: If you have deep roots, family, or strong preference for these states, the lifestyle benefits may outweigh the tax costs—only you can decide that trade-off.
Non-Tax Factors to Consider
Taxes shouldn't be the ONLY factor in choosing where to retire:
Healthcare Access
- Quality hospitals nearby: Essential as you age
- Specialist availability: Cardiology, oncology, orthopedics
- Medicare Advantage plan options: Some states have better plan availability and pricing
Climate and Geography
- Warm weather: Reduces heating costs, easier on arthritis
- Avoid extreme cold: Harsh winters pose safety risks (falls on ice, snow shoveling)
- Natural disaster risk: Hurricanes (FL, Gulf Coast), wildfires (CA, West), tornadoes (Midwest)
Proximity to Family
- Grandchildren: Being nearby is priceless for many retirees
- Aging support: Family nearby helps with medical appointments, emergencies
Social and Cultural Fit
- Active adult communities: Built-in social opportunities
- Urban vs. rural: Access to restaurants, culture, entertainment vs. peace and quiet
- Political/cultural alignment: Matters for some retirees
Key Takeaway
Don't move solely for tax savings if it means leaving behind family, friends, and lifestyle you love. The best retirement location balances financial benefits with quality of life—run the numbers, but also trust your gut.
Timing Your Move for Maximum Tax Benefit
When you establish residency matters for tax purposes:
Establishing Residency in a New State
- Spend 183+ days/year: Most states use physical presence test
- Get driver's license: Update within 30-90 days of moving
- Register to vote: Shows intent to make new state your domicile
- Update mailing address: Bank statements, tax forms, utility bills
- File state tax return: In new state as a resident
Strategic Timing
- Before taking large distributions: Move to FL/TX before taking $100k+ IRA withdrawal or Roth conversion
- Before selling highly appreciated assets: Capital gains are state-taxable in most states
- Avoid part-year resident traps: Some states tax you as resident for full year if you move mid-year
Example: If you plan to take a $200k IRA distribution for a home purchase, moving to Florida first saves $10k-$20k in CA/NY state taxes.
How Relocation Affects Your Retirement Plan
Use retirement planning tools like Bullseye to model the financial impact of relocating:
- Lower housing costs: Reduce monthly expenses (property tax, utilities, maintenance)
- Lower state taxes: Adjust your tax projection by removing state income tax
- Unlocked home equity: Model selling current home and buying cheaper one—add the difference to your investment accounts
- Test different scenarios: Compare staying put vs. moving to 2-3 candidate states to see long-term financial impact
Bullseye considerations:
- Update your state tax rate to reflect new state (or 0% for no-tax states)
- Adjust property tax expense if downsizing or moving to lower-tax state
- Model home sale and purchase in Scenarios feature
- Account for moving costs (typically $5k-$15k)
Summary: Choosing Your Ideal Retirement State
Key Takeaway
The best retirement state balances low taxes, affordable cost of living, quality healthcare, and lifestyle fit. Florida, Tennessee, South Carolina, Arizona, and Nevada consistently rank at the top—but your ideal state depends on your priorities.
Your decision checklist:
- Calculate tax savings: Compare your current state to candidates (income + property + sales tax)
- Factor in cost of living: Housing, healthcare, groceries beyond taxes
- Assess quality of life: Climate, healthcare access, proximity to family
- Visit before committing: Spend a month in candidate states during different seasons
- Run financial projections: Model the move in retirement planning tools to see 20-30 year impact
- Consider partial-year residence: Some retirees split time (snowbirds) between two states