With Some States in Trouble, Be Careful About Worst States to Retire

Category: Financial and taxes in retirement

Editor’s note: This report was originally written in 2009. There have been several new articles since then, notably “Worst States for Retirement, 2014“, which are more up-to-date.

Deciding which state you ought to retire to is hard enough. First you have to find the right climate, tax structure, environment, culture, crime, etc. But with the economic recession of the last few years another factor enters in – is your state in financial trouble so deep it might not be able to dig itself out (think worst states to retire)? The Pew Center on the States issued a report last week that should be enough to give you pause before you move to a new state, and might even convince you to move out of others. Note: We updated this story in late 2010. Don’t miss our latest “10 Worst Retirements States” piece.

The Pew Center named 9 troubled states in addition to California in its report, “Beyond California: States in Fiscal Peril”.

The top 10 Troubled States in the report are:
– California
– Arizona
– Florida
– Illinois
– Michigan
– Nevada
– New Jersey
– Oregon
– Rhode Island
– Wisconsin


These states’ budget troubles can have significant repercussions for retirees as well as general residents. Everyone in an affected state will be displeased to see higher taxes or fees; layoffs or furloughs of state workers; longer waits for public services; more crowded classrooms; higher college tuition, and less support for the poor or unemployed. But retirees could also see reductions of favorable treatment for retirees (such as property tax or income tax relief) as well as declining property values. Intergenerational strife is another possibility, as young families and seniors square off over education budgets.

California appears to be teetering on insolvency at times. “But while California often takes the spotlight, other states are facing hardships just as daunting,” said Susan Urahn, managing director of the Pew Center on the States. “Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers.”

In the report, Pew’s researchers identified factors that have contributed significantly to California’s difficulties, then determined the degree to which other states are experiencing the same challenges. These factors are: (1) loss of state revenues; (2) the relative size of budget gaps; (3) increasing joblessness; (4) high foreclosure rates; (5) legal obstacles to balanced budgets—specifically, a supermajority requirement for tax increases or budget bills and (6) poor money-management practices.

While the rest of the states share important characteristics with California, they may not be destined to follow in the Golden State’s footsteps. Some of these states already have responded aggressively to their budget crisis, although it is too soon to tell whether their actions will put them on solid fiscal footing.

“The 10 states are hardly the only ones at risk in this time of record-setting revenue drops, high unemployment and far-flung fallout from the housing bust and credit crisis. Virtually all states have been stressed by the downturn,” Urahn said. “We expect that when state lawmakers next spring turn to crafting their new budgets for 2011, many will confront an even tougher set of challenges. States already have made significant cuts, revenues continue to drop, and stimulus funds will be running out. ”

The Pew Center identified 4 trends running through the economic troubles of these 10 states:
– Unbalanced economies
– Revenues and expenditures out of alignment
– Limited ability to act.
– Putting off tough decisions

States’ fiscal situations are widely expected to get worse even if the national economy starts to recover. At the end of 2010, federal stimulus money that helped states meet some of their expenses will begin to run out.

Bottom line: The Pew Center emphasizes that some of the 10 states are making moves to solve their problems. There are plenty of other states that are also in trouble, and they might not be working on their problems. The point is that you should think twice about the state you might be considering moving to. Keep tabs on their fiscal health to make sure they are headed in a positive direction. If they are not, maybe you should reconsider moving there. Likewise if you live in a state with problems and were already thinking about moving out – maybe this is a good time.
For more information:
Read the Pew report: Insights From Fiscal 50’s Key Measures of State Fiscal Health

Posted by John Brady on November 16th, 2009

16 Comments »

  1. Up to now I enjoyed your retirement newsletter – but your article the “worst
    retirement states” only hurts our economy more, These states need help and
    you said “do not move to these states or get out while you can” Wow it is
    like kicking a dog when there down. Very disappointed in your website.

    by Antiquedealer — November 18, 2009

  2. There are a lot of retirees (and potential retirees) who probably consider taxes, among many other issues, when they are contemplating a move. These days, it would be very risky to base their tax-related decisions on ambient taxes in a certain state. With so many states scrambling to make ends meet, one must consider the high probability that tax burdens will change (increase) in many states in the coming years. The Pew report should be viewed as another tool when considering a move. As a retiree contemplating a move, I am quite concerned about the sustainability of state programs…so I appreciate the Pew study and will continue to seek all other available resources.

    by Charlie — December 1, 2009

  3. […] Shines on the 100 Best Places to Retire List for 2010 4 Reasons Not to Retire in These 7 States With Some States in Trouble, Be Careful Where You Retire Top 10 Tax-Friendly Towns What Are the Best States for Retirement All Blog […]

    by » The Best of the Best Places to Retire Topretirements — May 18, 2010

  4. […] worst – some states are on both – due to complexity of rating criteria and what gets rated!) Topretirements Worst Places to Retire Best States to Retire in 100 Best Places to Retire List of the Best Places to Retire Lists Look for […]

    by » The Worst of the Worst Places to Retire Lists Topretirements — November 23, 2010

  5. mexifornia is doomed. it seems the majority of voters believe in the “tooth fairy”. mr. “moon beam”, Jerry Brown, will be our governor for a second time. this is going to be a disaster, again. many of the money problems we face today, are directly tied to his leadership, during his last term as governor of mexifornia. i believe leaving mexifornia is the only solution we have.

    by david huckabee — November 26, 2010

  6. YES, I GREW UP IN CALIFORNIA… SWARZNEGGER PUT IT IN THE TOILET. I LEFT 2 MONTHS AGO AND LOOKING FOR A STATE WHICH WAS SIMILAR TO WHAT CA. USE TO BE:
    NO GRAFETTI, NO SMOG, NO CRIME AND NO ILLEGALS…. WOW. I AM ASKING FOR ALOT BUT WILL FIND IT…. CALIFORNIA USE TO BE OH SO GREAT. I CAN NOT BELIEVE IT DIED

    by Annette — December 1, 2010

  7. I don’t get it… you have the same states on your best list and your worst list… Are California Oregon and Arizona best or worst? Make up your muddled mind.

    by John — December 9, 2010

  8. John, you raise a great point and are not alone in pointing out our inconsistencies. In my opinion, these 3 states belong on both lists. It all depends on your priorities. If you are the type who is worried about the solvency of your state, I would stay away – all 3 have significant problems. On the other hand, these states have some fabulous places to live with some pretty darned good weather. If you have enough money or simply don’t care about the financial health of your state, you can have a very happy retirement there. To each his own!

    by John Brady — December 9, 2010

  9. This note is to Annette…I agree with you. I am looking to leave California as well. I have been here all my life and I am frustrated and burned out with Calif.’s politics and high taxes. Although, I am in the very north part of Calif. it doesn’t seem to be as disfunctional as southern Calif. Did you relocate? What state did you find that mirrors what Calif. use to be like?

    by Michael — November 3, 2011

  10. Not sure why you lumped Florida behind California. Florida balances its budget every year.

    by Blue — July 30, 2015

  11. This is a list of all 50 states and how they rank financially, etc.

    http://247wallst.com/special-report/2015/12/03/the-best-and-worst-run-states-in-america-a-survey-of-all-50-4/

    by Louise — April 20, 2016

  12. why is oregon so low in list when you can live on the coast with apts starting at 550$ per month??

    by MaryJane — April 21, 2016

  13. why is florida on this list. retirees still moving here by the droves. No income tax, not pension or social security tax. Rick Scott has balanced the budget every year. The Florida Retirement fund is in better shape then most other state pensions. On one fist you have 2 or 3 Florida cites for best retirement and now you are saying it is a fiscal mess. It is not a fiscal mess.

    by kathy d — May 7, 2016

  14. This list is from 2009. There is a 2014 list but you have to follow the links.

    by Lynn J — May 8, 2016

  15. Those responding here from 2015 to the present are referencing a 7 year old report published during one of the worst downturns in US history. The question should be – what are the results today.

    by Ron Friedman — May 8, 2016

  16. Note from Editor: Yes, this report is from 2009, a dark time economically. Those interested in this topic should see our more recent articles: http://www.topretirements.com/blog/great-towns/10-worst-states-for-retirement-for-2014.html/ , as well as this link to a 2015 report from Pew: http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind0

    The latter report shows that tax revenues have recovered in most, but not all states since the 2008-9 recession.

    by John Brady — May 9, 2016

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