Where should I retire? The best and worst states revealed 

If you want to identify a good U.S. state for your retirement, taxes and pensions are the two most important factors. Retirees usually aim for pension-friendly states that won’t be too expensive to call home. In this article, we’ll explore the best states and worst states to retire in from a financial standpoint, helping you make the right decision for your future.

What are the best states to retire in financially?

It’s a common question that many reaching retirement age in the USA are asking. But another common question is, “Can it really be that different from state to state?” And the short answer is yes, it really can. 

In 2019, almost 400,000 Americans moved states to retire. Some did this because they were seeking warmer weather or a different lifestyle, but most chose to pack up and head elsewhere because of tax benefits, property prices or other financial incentives.

There are dozens of factors to consider when determining the perfect retirement location, and they all change from state to state.

Factors like: 

• The tax benefits/drawbacks and costs 

• The quality and cost of housing 

• The quality and cost of healthcare 

• The quality and cost of public transport 

• The walkability, environment, crime rate and quality of life 

• The culture, diversity and atmosphere of the area 

• The state government and the state-wide response to issues such as climate change 

• The weather and lifestyle  

• The closeness of loved ones/family members/support networks 

It’s ultimately a personal/family decision where you end up when you exit the working world, but with plenty of research and preparation, you’ll find a range of great states that suit your retirement needs, financial situation and lifestyle preferences. 

The answer to this question all depends on your priorities and your financial situation.

The best state to retire on a fixed income is likely Alabama. A fixed income from pension/inheritance/social security offers little to no flexibility regarding the amount you get each month, so you need a state where housing markets aren’t volatile and the cost of living isn’t too high (so you can still cover unexpected expenses).

Alabama homes are affordable and increase in value by about 4.84% annually. 

Social security recipients should consider retiring in a state that can offer them deductions or exemptions depending on income and age.

The best states to retire on social security, which don’t tax social security income, include: 

• Florida 

• Nevada 

• New Hampshire 

• Tennessee 

• Washington 

For tax reasons, Delaware is a good choice. There’s no sales tax, no death taxes, and property taxes are also very low.

This means retirees will have more disposable income in their golden years, paying zero state or local sales tax on their in-state purchases. 

The best state for veterans to retire to might be Virginia. It offers many advantages to veterans, including health care options and tax exemptions, through 25 benefit services offices. 

For those focused on quality of life considerations beyond the financial, the most common questions are, “What’s the weather like?” and “What lifestyle can I live there?”

For retirees seeking sunshine, Florida is hard to beat. The sun shines in the Sunshine State 76% of the time, and the weather stays warm throughout the year.

For retirees looking for colder winters, outdoor activity opportunities and lower living costs, Michigan and Ohio are great choices.

1. Alabama – Alabama has some of the lowest property taxes in the country. Social security payments are exempt from income taxes, and income from pensions isn’t taxed either.  

2. Georgia – In this state, there is no social security tax. Plus, Georgia residents aged 65 and over get a deduction of $65,000 per person on all types of retirement income. 

3. Iowa – Iowa is home to many retirees since the state doesn’t charge income tax on social security. 

4. Mississippi – Mississippi is home to one of the most tax-friendly retirement systems in the country, and the cost of living is lower than the national average. 

5. South Carolina - Property taxes are low in the beautiful South Carolina mountains, and there’s no inheritance or estate tax in this state. 

While there are many excellent places to retire to in the U.S., some options might be less appealing than others.

Alaska, for example, can expose retirees to harsh winter conditions and a high cost of living, including very high gas prices. 

However, Alaska is an income tax and sales tax free state, making it a solid choice as one of the best states to retire on a fixed income.

1. Hawaii – While beautiful, the cost of living in Hawaii is very high, and the median home cost is well above other states.  

2. Oregon – Oregon is a pricey spot to retire in. Property is expensive, and there’s low Medicare spending, so healthcare costs can be a lot to contend with.  

3. Washington - Washington has high Medicare Advantage plan costs, and the state spends less per residence on Medicare than nearly any other state.  

4. Colorado - Many retirees are drawn to Colorado for its stunning landscapes, but the state actually has the fifth highest home price in the nation.