— This article was updated in April, 2014 —
May 22, 2012 — By popular demand we are providing a basic course in southwestern U.S. retirement, similar to what we did in Retirement 101:Florida (a 2 part series). We will cover 3 southwestern states with many similarities: Arizona, New Mexico, and Utah. Population and income data is from American Fact Finder-U.S. Census Bureau.
In our experience, most (but by no means all) retirees who immigrate to these states tend to be from west of the Mississippi and including many from California. The region is popular with people who are fleeing humidity and allergens.
A Few Facts
Arizona is by far the most popular of the three states for retirement. It is also the most populous with an estimated 2012 population of 6,553,255. Utah was next in size with 2,763,885, and New Mexico’s population was 2,059,179. The age statistics suggest that Arizona and New Mexico are much more popular for retirement than Utah: 14% of the AZ population is 65 and over, New Mexico is similar with 13.4%, and Utah is much younger with only 9.1% of the population in that age bracket.
Economics and Home Prices.
Arizona has made great progress in recovering from an overbuilt situation in the Phoenix area. In 2014 Zillow’s Home Value Index for Arizona homes was $178,400, well above what it was 2 years earlier, and similar to the index in New Mexico ($177,800). Scottsdale was the state’s priciest Metro at $371,700. Santa Fe was New Mexico’s most expensive Metro at a value of $337,500. At $216,800, the Utah index was considerably higher than both Arizona’s and New Mexico’s. Salt Lake City tends to have the priciest homes in Utah with a Zillow index of $247,600. The median household income in Arizona was $50,256, higher than New Mexico’s $44,886, but well below Utah’s $58,164.
Being at the same latitude, Arizona and New Mexico tend to have similar climates, although New Mexico’s greater altitude makes it a bit more temperate in summer and gives it more snow in winter. Utah is more northerly and at higher altitude, making it cooler with lots of winter snow in the mountains. All three states have a desert to semi-arid climate. The northern part of Arizona tends to be a higher plateau and thus cooler than the southern part of the state. The eastern part of New Mexico is lower and more in the Great Plains that its mountainous west. Humidity tends to be low in all 3 states. All 3 states have mountain peaks well over 12,000 feet.
Tax Environment Comparison
Arizona and New Mexico are the tax-friendliest of these states (see state and local tax burdens below). Arizona exempts social security and some pensions from state income tax. The data below is from the Tax Foundation and Tax-Rates.org. For more detail about taxation and other information about each state see our mini State Retirement Guides.
Avg Inc Tax
5% flat rate
State Sls Tax*
Med Prop Tax
*Localities may add additional sales taxes
Tax Soc Sec
Taxation of Pensions
Yes, in-state & milit. exempt
Yes, most milit. exempt
Places to Live by State
Arizona State Guide
The Phoenix area has the biggest retirement population. Most of the towns around the Phoenix area are suburban and tend to be characterized by new growth. The city’s size exploded after World War II, engulfing neighboring farm towns like Glendale in the process. During the buildup that led to the 2007 housing bust development occurred in communities farther and farther out from the center – places like Goodyear, Surprise, and Buckeye to the northwest – and Gilbert, Chandler, Apache Junction, and San Tan to the southeast. The old and affluent suburbs like Scottsdale and Paradise Valley, and the college town of Tempe were less affected by the recent buildup. Over-development in the outlying areas helped lead to the bust, and that real estate hangover caused Arizona’s real estate prices to crash, although they are mostly recovered now.
On the plus side, the Phoenix area is loaded with nice places to live – both towns and active communities. Many have a large assortment of amenities. The Sun City communities are well established and huge, although many of them have an older population.
In our opinion some of the nicest places to live in Arizona are in the northern portion of the state among its cooler hills, pine forests, and mountains. Real estate prices reflect that – they are considerably higher than in the Phoenix area.
Prime towns for retirement are artsy and beautiful Sedona (at left) , the old wild west town of Prescott, and Flagstaff, which was America’s film capital before Hollywood. Of all the towns in northern Arizona, by far the greatest choice of active communities is in the Prescott area.
In the northwestern part of the state is another group of less know towns. Those include Kingman, Lake Havasu City, and Bullhead City. Real estate is generally much less expensive than elsewhere in northern Arizona. If you live in these towns you will be closer to Las Vegas than Phoenix.
The area along the Interstates between Phoenix and Tucson and down to the Mexican border also has its interesting share of retirement towns and communities. Casa Grande is the closest one to Phoenix. Tucson has many fans for its beauty, warmer winters, the University of Arizona, and mountains. Communities around it like Oro Valley have their attractions as well. Lastly, almost in Mexico are Bisbee and Green Valley – one of the largest retirement places on earth, with close to a dozen or more communities within it.
Southern Arizona is obviously a lot hotter in the summer and warmer in the winter. Much of it is serious desert, although there are plenty of mountains to enjoy. Birdwatching and golf are 2 popular activities. The farther south you go, the further you are from the mainstream U.S.
New Mexico State Guide
This less populous state does not have that many choices for retirees. The most desirable towns are concentrated in a few pockets of the central portion of the state. Albuquerque, located near its center, is by far the biggest city with the most retirement communities to choose from. North of that is the arts town of Santa Fe, the most affluent town in the state. The popular ski resort of Taos(shown here) is also located in the northern part of NM.
In the southern portion of the state retirees are attracted to towns like Ruidoso, Las Cruces, and Alamogordo. This area of the state tends to be warmer and closer to west Texas. For the most part the towns are beautiful, but isolated.
Utah State Guide
The third state we are comparing in this trio is also the least oriented towards retirement. It has a younger and fast growing population and a vital economy (along with a lot of tourism). Utah also has a significant (60% according to Wikipedia) population that belong to The Church of Jesus Christ of Latter-day Saints (LDS Church), which many non-Mormons feel uncomfortable about. That concentration varies by area – it is much less in resort towns like Park City and booming retirement towns like St. George. Much of the state is uninhabited, with population centered within an hour of so of Salt Lake City.
Salt Lake City, Park City (at left) and Ogden, located in the north, are both great towns for folks who love the outdoors. Although there are some 55+ communities in these towns, you are more likely to find developments or neighborhoods that are not active adult communities. The outlier in the state for retirees is St. George, which is very close to Arizona in geography and feel. Along with Zion National Park, it has by far the most active communities of any Utah town.
Comparisons and Observations
– Arizona is by far the most popular state for retirement of the three. Topretirements has reviews of 32 retirement towns for Arizona, but only 9 towns each for Utah and New Mexico. Our site has reviews of over 150 Arizona active adult or 55+ communities, compared to 34 in New Mexico and 25 in Utah.
– Arizona is the cheapest in terms of real estate.
– From a tax standpoint for retirees AZ also comes up tops, with no tax on Social Security and the lowest income tax (although the highest property tax rate).
For further reference:
State Retirement Guides
Retirement 101 Mid-Atlantic States: MD, DE, VA, NJ
Florida Retirement 101
Dueling Carolinas: NC vs. SC
Dueling States: Arizona vs. Florida
California Retirement 101
The Mountain States: CO, ID, MT, NV, UT, WY
The Pacific Northwest: Oregon vs. Washington
Comments? We and all your fellow members love to know what you are thinking. Please share your thoughts about retirement in these 3 states in the Comments section below.