The Best and Worst States to Retire To (And Why It Matters More Than You Think)
Where you retire matters almost as much as how much you save.
Most people spend decades obsessing over their investment returns, their savings rate, their retirement account balance. All of that matters. But then they retire in a state that quietly eats 10, 15, even 20% of their income through taxes, high housing costs, and expensive insurance.
The state you choose to retire in can add or subtract hundreds of thousands of dollars from your lifetime retirement budget. That's not a rounding error. That's life-changing money.
Here's who's winning and who's losing.
The Best States to Retire To Financially
A handful of states consistently show up at the top when you factor in taxes, cost of living, and retiree outcomes. They all share one thing in common: no state income tax.
Wyoming ranks at or near the top in most 2025 and 2026 retirement studies. No state income tax, low overall tax burden on retirement income, and relatively affordable housing. The trade-off? Harsh winters and limited healthcare access in some rural areas.
Florida is the classic retirement destination for a reason. No state income tax, no tax on Social Security or most retirement income, plus decades of retiree-friendly infrastructure. The downside is real though. Housing costs and insurance premiums, especially homeowner's insurance, have been climbing significantly in recent years.
South Dakota doesn't get enough attention. No state income tax, very favorable tax treatment of retirement income, and a relatively low cost of living. It consistently appears in the top tier across tax-friendliness rankings. It's more rural and the weather is brutal, but financially it's a powerhouse.
Tennessee and Nevada both lack a broad state income tax and are frequently cited as tax-friendly for retirees. Tennessee has no tax on wages or investment income. Nevada gives you Las Vegas or Reno without the California price tag.
Texas and Washington round out the list. Both have no state income tax, though Texas property taxes are higher than most people realize. Washington has no income tax but does have a sales tax.
Why These States Win
A middle-class retiree drawing mostly from Social Security and traditional IRAs will often see a meaningfully lower lifetime tax bill in a state with no income tax and decent property-tax homestead relief than in a high-tax coastal state.
Run the math. If you're pulling $60,000 a year from a combination of Social Security and IRA withdrawals, and your state is taxing that at 5 to 7%, that's $3,000 to $4,200 per year going straight to the state. Over 20 years of retirement, that's $60,000 to $84,000.
That's a vacation fund. That's a down payment. That's years of investment contributions you could have kept.
The Worst States to Retire To Financially
On the other end, some states are quietly destroying retiree budgets.
New Jersey is repeatedly ranked at or near the bottom. High cost of living, one of the nation's steepest top personal income tax rates at around 10.75%, and brutal property taxes. Even though average Social Security income is high in New Jersey, the state takes a massive bite out of it.
New York has an extremely heavy total tax burden and expensive housing that erodes retiree budgets despite strong cultural amenities and services. Living in Manhattan or even the suburbs on a fixed income is a brutal financial proposition.
California, Massachusetts, and Connecticut are frequently flagged for high housing costs, high income and property taxes, and weaker affordability rankings for retirees. These are beautiful states with great services. They're just expensive to retire in.
The Other Kind of Bad: Cheap but Risky
Here's where it gets uncomfortable.
Some states look great on paper because housing and basic living costs are low. Mississippi, Oklahoma, Arkansas, Louisiana, West Virginia, Kentucky.
On a spreadsheet, they look affordable.
But when you factor in health metrics, quality of life scores, and limited healthcare access, these states show up near the bottom of most retirement rankings.
Kentucky often ranks last or near last overall once you combine affordability, health, and quality of life. "Cheap" does not mean financially secure in retirement when you price in healthcare risk and outcomes.
A retiree in a low-cost but medically underserved state may face higher long-run health and travel expenses that more than offset the savings on rent and groceries. If you need to drive two hours to see a specialist, that adds up fast over a 20 or 30-year retirement.
The Key Financial Levers to Compare
When evaluating states for retirement, these are the numbers that actually matter.
Income taxes on retirement income. Does the state tax Social Security?
How does it treat pensions, 401(k) and IRA withdrawals, and annuities? Full tax, partial exemption, or full exemption makes a massive difference.
Property taxes. What's the effective rate? Are there senior freezes, homestead exemptions, or circuit-breaker credits that reduce your bill?
Some states have low income tax but punishing property taxes.
Sales and excise taxes. State plus local sales tax combined. Watch out for gotcha categories like groceries, utilities, or prescription drugs. Some states tax all of these. Some exempt them.
Cost of living. Housing is the big one, whether you're renting or buying. But Medicare supplemental premiums, out-of-pocket health costs, home insurance, auto insurance, and everyday expenses all add up.
Health and longevity implications. Access to hospitals and specialists, chronic disease prevalence, and long-term care costs can materially change how much money you actually need. This one people consistently underestimate.
The Real Question Nobody Asks
Most people think about retirement as a number. "How much do I need to save?" That's the right question. But the follow-up question is just as important: "Where am I going to spend it?"
A $1.5 million retirement nest egg in Florida or Tennessee gives you a very different lifestyle than that same $1.5 million in New York or California or New Jersey.
The state you choose to retire in is one of the biggest financial decisions you'll ever make. It's not exciting. It doesn't make headlines. But it quietly determines how comfortable, or how stressed, your retirement actually is.
What to Do Now
You don't need to have your retirement state picked out today. But you should start thinking about it earlier than you are.
Start by identifying the states that matter to you financially. Narrow it down to three or five candidates. Then compare the key levers: income tax treatment, property taxes, cost of living, healthcare access, and climate.
Factor in proximity to family, weather preferences, and lifestyle. The best state financially isn't always the best state for you personally. Wyoming is amazing on paper, but if you hate cold weather and want to be near your grandkids in California, Wyoming isn't your answer.
The intersection of financial strength and personal fit is where you want to land. Find that sweet spot and plan around it.
Because where you retire isn't just a lifestyle choice. It's a financial strategy.
P.S. Never move just for money, especially with family ties. Life is too short to sacrifice and optimize just for money.
