November 24, 2020

Edited 12/30/20

Best States to Retire: Here’s a Breakdown of the Most Retiree-Friendly States

Check out the retirement destinations where you’ll be able to spend less time worrying about your spending and more time enjoying your retirement days.

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Deciding where you want to retire brings the potential for adventure. Maybe you’ve always pictured yourself enjoying stress-free days on a remote tropical beach, or you’re itching to finally dust off that RV and explore some national parks. You might even want to spin the globe and head to wherever your finger lands.

But for many people, picking a retirement destination comes with more practical considerations than adventurous ones. You might want to be near the grandkids—but can you afford the taxes in their state? What does the home insurance bill look like on that beachfront property of your dreams? Will you be able to afford in-home care if you decide to ride out retirement in your current house? Where will your social security check go the farthest?

A recent study took a stab at answering some of those questions by ranking all 50 US states from the best to worst places to retire. You might not be surprised to learn that Florida scored first place overall, maybe because there’s a retirement community in the Sunshine State. Kentucky rounded out the bottom of the list, thanks to poor rankings for both quality of life and healthcare. 

But simply learning that Florida snagged the number one spot doesn’t tell the whole story. We took a look at the several different factors that retirees should consider before landing on a great retirement destination and broke them into categories that can help you weigh the pros and cons of different states all around the country. Whether you’re weighing your options for a new retirement locale or want to see how your current state stacks up against the competition, keep reading for more info on retirement-friendly destinations.

The Taxman Cometh 

You already know you’re going to have to pay taxes no matter where you retire. But there are some places where your state tax bill won’t be quite as high. Keep in mind the different types of taxes you’ll run into in different retirement locations:

State Income Tax:

In addition to the balmy weather, one of the reasons Florida has become such a retiree haven is the lack of income tax. That means that even if you’re no longer collecting an income from a job post-retirement, you also won’t get taxed by the state on typical retirement revenue streams like your Social Security benefits, pensions, withdrawals from your 401(k), an IRA distribution, or money from any part-time gigs you might pick up in retirement. Forgoing that state income tax bill can be a game-changer for many retirees, and help their savings last far longer than they would in other higher-tax states.

There are 7 other states that won’t tax your income today, and 2 others coming soon: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no current income tax. In New Hampshire and Tennessee you won’t get taxed on wages, but you will on interest and dividends, though both states are in the process of phasing out those taxes. New Hampshire’s is set to end in 2025, and Tennessee’s at the start of 2021.

Effective State Tax Rates:

Even if your income isn’t taxed at the state level, you’re still likely going to be on the hook for various other state and local taxes, such as sales and excise taxes, vehicle property taxes, and property taxes. If you want to keep your overall tax burden for state and local taxes as low as possible, Alaska, Florida, Nevada, and Wyoming all come in as winners. In those states, your income won’t be taxed at the state level and you’ll have some of the lowest state effective tax rates in the country, with the median household paying less than a 9% effective tax rate across all forms of taxes—as low as about 5.7% in Alaska. In Delaware, Nevada, and Montana, you will have to pay a state income tax, but your overall effective state taxes will remain on the lower end compared to the rest of the US, also typically coming in lower than an 8% rate. 

If you’re really looking to keep your state and local tax burden low, avoid retiring in New York, Illinois, Connecticut, or Pennsylvania—there, the total effective state and local tax rates on the median household, accounting for state income taxes, sales and excise taxes, property taxes, and various other non-federal taxes are typically higher than 13%. And while you’ll save on state income tax in a state like Washington, your all-in effective state tax rates are typically going to be just above 12%.

Property Tax:

Maybe property tax isn’t a factor in your retirement plan—you might be planning to rent, or move in with a family member. But if you’re thinking about owning during retirement, you might want to consider a state where it’s possible to pay less than the $2,375 that the average American household spends each year on property taxes.

New Jersey, Illinois, Connecticut, Vermont and Wisconsin all have relatively high property taxes compared to the rest of the country, with rates higher than 1.7% of property taxes paid as a percentage of owner-occupied housing value. And remember how New Hampshire and Texas won’t tax your wages? They make up for some of that lost revenue with property tax rates on the very high end of the spectrum, with New Hampshire typically going higher than a 2% effective property tax rate. 

Wyoming and Nevada, on the other hand, rank as super tax-friendly states for retirees because in addition to the lack of income tax, their property taxes are also some of the lowest in the country, typically sitting around 0.6%.

Bills, Bills, Bills

Of course, taxes won’t be the only costs you’ll be responsible for in your golden years. Retiring to a place where the overall cost of living is relatively low can be an effective way to keep your spending low. That way, you’ll have the funds to carry you further into retirement, be able to set more aside for financial surprises, or allow you to splurge on things like travel. 

Mississippi, Arkansas, Oklahoma, Tennessee, and Alabama top the list of states with the lowest adjusted costs of living. In states like New York, Alaska, California, Oregon, and Hawaii, though, everything from a restaurant meal to your gas bill is probably going to be higher than it would be in other parts of the US. In Mississippi, for instance, the average rent for a two-bedroom is $746, and the average annual spend on groceries comes in at $4,205. In California, rent on a two-bedroom will run you $2,495 or more, and you can expect to spend an average of $5,263 on your grocery bill each year.

If you head to retiree hotspot Florida, your cost of living will be right around the middle of the road compared to the rest of the country. There, the average cost of a 2-bedroom is $1,630, and your groceries will cost an average of $4,647 annually.

Paying the Doc

Unfortunately, healthcare is a high and often underestimated cost that most retirees have to shoulder. A healthy couple that’s retiring in the US right now will need $285,000 to pay for healthcare for the rest of their lives, according to Fidelity’s annual Retiree Health Care Cost Estimate. That number can quickly skyrocket if you are treating conditions like cancer or need long-term care. 

Healthcare needs and costs vary wildly between people, and it’s difficult to plan for exactly the type of care you may one day need. It’s also difficult to make rankings based on cost alone, even though costs are impossible to ignore for most people. 

In some states, though, you’re getting what you pay for. For instance, in West Virginia, the average monthly cost of a home health aide is $3,241, compared to $5,529 in Minnesota. You’re also paying more for Medicare in Minnesota. The state’s average monthly premium is $101.46, compared to West Virginia’s $52.11 (both significantly higher than states on the lower end, like Florida’s $13.80 or South Carolina’s $22.21). But West Virginia has the lowest healthcare score for retirees, while Minnesota gets the highest.  

For more specific information about your current or potential future home, you can use this interactive map to take a look at what long-term care will look like in that area.

Getting Personal

There’s no perfect, one-size-fits-all place to retire. Instead, it’s smart to think about your priorities as a retiree—maybe you know you have to be near a beach, won’t settle for mediocre healthcare, or are only choosing from states without an income tax—and go from there. 

It’s also super helpful to calculate and play around with your Retirement Score using Silvur. The app allows you to enter all your information so that you can get a firm answer on exactly how long your current savings will last you in retirement. But it also allows you to enter hypothetical information, so you could see how a move to Texas, for instance, would impact your score, or what taking on a little part-time job would do to really boost your savings. 

Putting all your information in Silvur might also get the wheels turning in your head about the other resources you’ll need for retirement. Maybe you want to use a site like eHealth to compare health insurance plans around the country, so you can be realistic about where a retirement move could really take you, or use Hippo to save up to 97% on prescription drugs no matter where you are.

Your Silvur Retirement Score might also be a wake-up call that you’re paying way too much on day-to-day expenses, like home insurance. Tools like Matic allow you to get instant quotes on a wide variety of plans, meaning you could make moves to cut back on your current bill or scope out what insurance payments might look like if you’re considering a retirement move.

Or maybe Silvur helps you realize that the big retirement vacation you’ve always dreamed about is possible, but you still aren’t sure what to do with all your stuff while you travel the world. MakeSpace sends you everything you need to pack up (or get rid of!) all your stuff, and then keeps it safe and easily accessible while you enjoy your trip. When you’re ready to get some stuff out (or just want to check in on it to make sure it’s still safe), you can simply pull up the app and get an inventory of everything you’ve put away. With just one tap, you can also have your stored belongings delivered to your new retirement pad.