The 10 Cheapest States to Retire

Category: Financial and taxes in retirement

June 11, 2018 — Some of the more reliable “10 Best Places to Retire” Lists come from Kiplingers. They recently came out with their “10 Cheapest States to Retire” version, and we think it is a pretty good effort. To come up with their ratings they looked at cost of living, taxes on retirees, average health care costs for retirees, and fiscal health of the state. As is often noted, sometimes you get what you pay for, although in the case of most of these states, you do tend to get more for your retirement dollars.

Although they didn’t numerically rank their “cheapest 10”, one ranking that is clear was cost of living compared to the rest of the U.S. Note that these rankings are on a statewide basis: different areas of different states can have dramatically different living costs. In big cities and desirable developments, for example, cost of living will be higher than in rural areas. Here is their “Cheapest” list in order of cost of living vs. U.S. average (follow links in the name of the states to find out more):

Alabama beaches

Alabama. Cost of living is 13% less than rest of U.S. Ranked overall as #6 of all states for retirees. The Gulf Coast has some nice areas for retirees as well as interesting small cities like Huntsville.

Tennessee. Cost of living is -12% vs. U.S. Considered tax friendly (no income tax, although dividends and interest are taxed). It has college towns like Knoxville and many big communities attracting the 55+ crowd along huge lakes like Tellico Lake.

Iowa. Along with two other states on this list, its cost of living is 12% less than in rest of U.S. Kiplingers ranks it #13 overall for retirement, but we are not sure why, since it is not considered tax friendly, doesn’t have a great climate, and is in the middle of the country with neither coasts nor mountains.

College town of Oxford

Ohio. Ranked #19 overall for retirement, Ohio does have a lower cost of living (-12%). It also has some great places to retire, including many college towns like Oxford. The tax picture for retirees is mixed.

Missouri. In the Show Me State the cost of living is 10% less than U.S. on average. Although ranked #20 overall, it is ranked #42 on their healthcare measure, with many people living unhealthy lifestyles.

Georgia. Kiplinger ranks the Peach State #3 overall for retirees. Cost of living is -7% compared to U.S. average, and it is considered tax friendly. Atlanta is the big city, Savannah, Athens, the Atlantic Coast, and western mountain towns are places that attract most retirees.

South Carolina. Considered tax friendly, you can expect a cost of living that is 7% less than the rest of America and a #12 overall ranking for retirement. Myrtle Beach, Hilton Head, and the Charleston area are prime for retirees, but college towns like Clemson, or beautiful Greenville get their fair share of retiring baby boomers.

Idaho. Stunning mountains and the vibrant city of Boise are big draws for retired boomers. Cost of living is 5% less than remainder of U.S.

South Dakota. Somewhat surprising, SD is one of only two states on this list that do not have an income tax. That makes it very tax friendly – cost of living is -4%. The climate won’t appeal to everyone, but the outdoors environment is beautiful.

Pennsylvania. Another very tax friendly state to retirees, PA’s cost of living is -3% and it is ranked #14 overall for retirement. The income tax rate is a flat 3.07% and most retirement income is not taxable. Property taxes tend to be high. It has big cities popular for retirement like Pittsburgh or Philadelphia, and many attractive small towns as well.

Bottom line
If cost of living is an important driver for your retirement, consider these states. There is enough geographic diversity here that one might match your needs. There are other inexpensive retirement states to consider too, particularly in the south and midwest, although they might have other drawbacks.

Comments? Is cost of living an important consideration in your retirement plans? What states and areas have you been thinking about? Please share your thoughts in the Comments section below.

For further reading:
Affordable Places to Retire on the Waterfront
Most Tax-Friendly States for Retirement



Posted by Admin on June 11th, 2018

5 Comments »

  1. I am writing about your recent “Cheapest States to Retire” article – in particular the state of South Carolina. My question is does your article about retirement taxes include Social Security, Qualified Pensions, Real Estate taxes and Personal Property taxes? I am particularly concerned about personal property taxes that are placed on Cars, Boats, RVs & Campers. Can you please explain some details regarding the Personal Property Tax and how it affects retirees?

    Kind Regards,
    Joe

    by Joe Lacker — June 13, 2018

  2. How does Arizona come out!

    by Diane — June 13, 2018

  3. Folks, if you actually read this article, you will note this is a review of the “Kiplingers” list. Not the “Top Retirements” list.

    by Ken — June 13, 2018

  4. Joe Lacker, This article provides good information for seniors on SC taxes: https://carolinaliving.com/financial-matters/south-carolina-taxes
    As for property tax, millage rates vary by county. Here’s a listing of county millage rates for last year: http://www.sccounties.org/Data/Sites/1/media/publications/propertytax2017.pdf

    by Kay — June 14, 2018

  5. To Diane, I live in Arizona, and it is very reasonable to live here!

    by Loralee — June 16, 2018

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