The best and worst states to retire in—for taxes and more

february 16, 2024


Choosing the right state to retire in is an important part of retirement planning. Learn which states are considered the Top 5 most popular states to retire in.

Taxes can chip away at your retirement savings depending on where you live because, as we all know, each state has its own unique tax structure that can provide benefits or limitations for retirees, or both. So we looked at the states with the lowest tax burden and some of the pros and cons of living in each.

Here, from the bottom up, are the five states with the lowest total tax burden as ranked by WalletHub.1 The factors they considered include property taxes, individual income taxes, and total sales and excise taxes.
 

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1.  Alaska – 5.06% total tax burden

Pros: Alaska may appeal to those with a sense of adventure because it features some of the most beautiful geography anywhere. It boasts 17 of the nation’s 20 highest peaks and the Tongass National Forest – the largest in the country.2 Further, for the adventurous among us, Alaska contains more undeveloped land than anywhere else in the US offering an unparalleled sense of freedom for those inspired to explore the great outdoors.3 The state ranks in the middle of the pack in terms of median home prices at $384,000.4 While it’s the largest state by area, it has the lowest population density in the country.5 So for anyone looking to get away from it all, you need to go no farther than Alaska.

Cons: U.S. News & World Report ranked Alaska 37th  in healthcare, so the state may not be the best choice for those with health issues.6 Alaska also has one of the highest costs of living in the country, at $48,670 per year,7 and ranks toward the bottom of the list in terms of infrastructure. Anyone on a tight budget or accustomed to the trappings of modern city life might want to consider retiring elsewhere.
 

2. Delaware – 6.12% total tax burden

Pros: Delaware is one of the most popular states in the country for retirement, ranking second (after Iowa) in Bankrate’s analysis,8 which considered factors including general affordability, cost and quality of healthcare, well-being, weather, and crime. Taxes have been kept low by a business base that includes chemical manufacturing (think DuPont) and the large finance and insurance companies operating there. And if you don’t already live in Delaware, don’t fret. The median home price is a relatively moderate $335,000.9

Cons: While air and water quality are good in Delaware, which ranks no. 14, the pollution level gives the state a disturbing ranking of no. 47.10 You might want to have ground-level toxin levels checked for any property you consider purchasing.
 

3. New Hampshire – 6.14% total tax burden

Pros: New Hampshire is one of the best states to live in, according to U.S. News & World Report, which ranks the state no. 6 overall. Helping to elevate that ranking are two no. 1 rankings, for crime/corrections and opportunity, plus two other top 10 rankings for the economy (no. 4) and natural environment (no. 8).11 Nature lovers and outdoor sports enthusiasts will likely fall in love with the state.

Cons: New Hampshire’s infrastructure (ranked no. 30 by U.S. News & World Report) is a relatively weak point, and its fiscal stability (at no. 41) is even lower,12 suggesting that the favorable tax climate could change at some point. With the median home price at $468,000, you could do a lot worse or, depending on your priorities, a lot better.13
 

4. Tennessee - 6.22% total tax burden

Pros: Tennessee is almost smack at the midpoint of U.S. News & World Report’s rankings for best states to live in, coming in at no. 24. It’s a music lover’s paradise, particularly for country music lovers, with Nashville’s Grand Ole Opry serving as its mecca and Elvis Presley’s Memphis estate, Graceland, ranked as the second-most visited residence in the country after the White House.14 Plus, perhaps even better for those looking to reduce the financial burden of their housing for the length of their retirement, the $385,000 median home price is relatively affordable in comparison to other states.15

Cons: While its fiscal stability, infrastructure, and economy are all good, according to U.S. News & World Report, Tennessee falls in the bottom half of the publication’s rankings for crime/corrections, education, healthcare, natural environment, and opportunity which again, depending on your personal priorities, may put a sour note on all the positives listed above.16
 

5. Florida – 6.33% total tax burden

Pros: Florida was the most popular destination for people who moved for retirement in 2022, according to an analysis of U.S. Census Bureau data reported by AARP.17  Those retirees must know something. The state’s low tax burden is one reason. Housing costs – with a median home price of $409,000 – is another.18 Beaches, amusement parks, nightlife, and tropical weather are all part of the attraction. U.S. News & World Report ranks Florida as the no. 10 best state to live in.19

Cons: Florida’s total cost of living is ranked no. 21 by Forbes.20 Transportation costs (ranked no. 13) are fairly high.21 So are apartment rentals (ranked no. 7).22 And weather is a two-edged sword: warm winters can be a blessing, but brutally hot summers and potentially devastating hurricane seasons are good things to think about when comparing the relative safety of Florida to a place like Maine.
 

If you want to understand how the tax climate and cost of living could affect you in the state you’d like to retire in, check out our retirement expense and income calculator. Just choose the state you’re interested in, fill in your information, and you’ll see how your retirement might fare. Good luck with your retirement and, whether it entails a new destination or not, remember to enjoy the journey.

Annuities are long-term, tax-deferred vehicles designed for retirement and are insurance contracts. Variable annuities and registered index-linked annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on living benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity and may be subject to conditions and limitations. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

*Tax deferral offers no additional value if an annuity is used to fund an IRA or a qualified plan, such as a 401(k), and may be found at a lower cost in other investment products. It also may not be available if the annuity is owned by a legal entity such as a corporation or certain types of trusts.

1. Adam McCann, WalletHub, “Tax Burden by State (2023),” March 28, 2023

2. U.S. News & World Report, “Overview of Alaska,” accessed November 6, 2023

3. Ibid.

4. David McMillin, Bankrate, “Median house prices by state,” June 2023

5. U.S. News & World Report, “Overview of Alaska,” accessed November 6, 2023

6. Ibid.

7. Robin Rothstein, Forbes, “Examining The Cost Of Living By State In 2023,” August 24, 2023

8. Alex Gailey, Bankrate, “The best and worst states to retire in 2023, ranked,” July 31, 2023

9. Bankrate, “Median house prices by state,” June 2023

10. U.S. News & World Report, “Overview of Delaware,” accessed November 6, 2023

11. U.S. News & World Report, “Overview of New Hampshire,” accessed November 6, 2023

12. Ibid.

13. David McMillin, Bankrate, “Median house prices by state,” June 2023

14. U.S. News & World Report, “Overview of Tennessee,” accessed November 6, 2023

15. David McMillin, Bankrate, “Median house prices by state,” June 2023

16. U.S. News & World Report, “Overview of Tennessee,” accessed November 6, 2023

17. Andy Markowitz, AARP, “Top 5 States Where Retirees Are Moving,” January 6, 2023

18. David McMillin, Bankrate, “Median house prices by state,” June 2023

19. U.S. News & World Report, “Overview of Florida,” accessed November 6, 2023

20. Robin Rothstein, Forbes, “Examining The Cost Of Living By State In 2023,” August 24, 2023

21. Ibid.

22. Ibid.

 

 

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