August 10, 2021 – It is a question a lot of people nearing retirement age have – what is the best state and town for retirement? While it is a great question, the answer is not that simple – it depends on what you are looking for. Do you mean the best retirement state for taxes, the state with the best climate, the one that offers the lifestyle you want to live, or the place with the lowest cost of living, etc. Until you know what you are looking for, it is a hard to get at the right answer. (Note: This is an update to our 2018 article on “The Best 10 States for Retirement“, which generated almost 100 interesting comments).
One good way to determine the best state for retirement is is to look at which states retirees are moving to. SmartAsset.com analyzed US Census Bureau data to explore which states have the highest retirement age net migration – the number of people age 60 and over moving into a state minus the number moving out. In effect, it is a measure of how people voted with their moving vans. Here is what SmartAsset came up with when examining data from 2019: (T indicates a state with no income tax)
- Florida (T). There are a lot of good reasons to retire in Florida: no income tax, no inheritance tax, Homestead Law, warm winters, and plenty of places to live. Interestingly enough, only one Florida city made SmartAssets’ top 10 city list – Fort Myers (#7) .
- Arizona. Ditto on warm winters, beautiful scenery, and many affordable places to live including active adult communities. AZ had 3 of the top 10 net immigration cities in 2019. AZ is relatively tax-friendly – it doesn’t tax Social Security, has relatively low property taxes, and has the 36th highest Tax Burden from the Tax Foundation. Mesa, home to many active adult communities, won the distinction of being the American town with the most over 60 net immigration. Scottsdale (#2) and Tucson (#10) also made the top 10 list.
- North Carolina. The Tar Heel state has a reputation as a relatively tax friendly place to retire. There are some exemptions for retirement income. The State has two cities that made the top 10 net migration list, Cary and Charlotte.
- South Carolina. Sometimes it seems like the two Carolinas are in a competition for which state can be the more tax-friendly. People over 65 get a $15,000 exemption on qualified retirement income in SC. The State has slightly warmer winters and plenty of nice places to retire like Beaufort.
- Texas (T). New to this list this year, the Lone Star State came in in 5th place, a very big move. The State has no shortage of interesting places to retire, from the Hill County to exciting Austin to its long coastline on the Gulf of Mexico. Although it has no state income taxes, it does tend to have relatively high property taxes.
- Tennessee (T). New to the net migration list, Tennessee recently ceased have any type of state income taxes (it previously taxed dividends and interest). There are many towns in the hills and mountains popular with retirees.
- Idaho. This state has a lot more to offer retirees than its famous potatoes. For one, its outdoor recreation is hard to beat. Cost of living is relatively low, at least compared to the coasts, and so are property taxes (people over 65 get a significant break on their primary residence).
- Oregon. One of the non-Sun Belt states with the most retiree net migration, Oregon has a fairly mild climate. Its other attractions include no state sales tax, interesting cities like Portland, and amazing outdoor experiences in places like Bend. Eugene, home to the University of Oregon, made the top 10 net migration list for cities.
- Nevada (T). It was not much of a surprise that the Silver State benefitted from net over 60 migration. It has warm winters and plenty of active adult communities with all kinds of amenities. There is no state income tax. Two cities, Henderson and Paradise, made the top 10 cities list for net migration.
- Alabama. We were surprised again by Alabama making this list, since it is not among the most popular states on Topretirements. Its very low taxes and cost of living must be very important reasons for that. The Gulf Coastal areas are well set up for retirement, while Huntsville in the north offers a diverse small city environment.
Two new states made this list in 2021, while two dropped off from the 2019 list. Tennessee and Texas made it this year, while Delaware and Georgia dropped off the list. Note that home prices tend to be reflected in these states’ desirability. In the 2nd quarter 2021 home price report from just released by the NAR, three of these states had the hottest markets in the country, with price gains of more than 40% year over year: Austin (TX), Boise (ID), and Naples/Marco (FL).
It is fairly easy to see why these 10 states are at the top for retiree net migration. When it comes to climate, all 10 of these states are in the Sunbelt, the Rockies, or the Pacific Northwest – desirable areas for reasons of climate or terrain. Florida, the Carolinas, Texas, Alabama, and Oregon have extensive coastlines. Taxation wise, 4 of the top 10 have no state income tax, while Oregon has no sales tax. Most of the winning states have a lower than average cost of living: Tennessee and Alabama are in the lowest 10 cost of living states; Nevada and Oregon are the only 2 with a higher than average cost of living.
Another measure of retirement state popularity is to look at which states generate the most interest at Topretirements.com. To do that we compared how many visitors looked at our various state mini-retirement guides. The result showed some interesting differences from the net migration top 10 list. For example, Montana, Wyoming, Kentucky, Delaware, New Mexico, South Dakota, Virginia, Mississippi, and Utah generated as much interest as many of the states on the net migration top 10. Perhaps that reflects curiosity about potential retirement states they don’t know much about, or it might mean that people about to retire think they already know enough about the more famous retirement states.
Best states for taxation
Determining the best state for retirement taxes isn’t quite as simple as it might seem. For sure, the 8 states with no state income taxes make that cut. But four of the states with no income tax, Alaska, South Dakota, Washington, and Wyoming, did not make it onto the top net migration list. State sales taxes are not usually that big a factor, although Oregon merits a plus for not having one. But what makes comparing states with state income taxes difficult is that each one seems to have its own schedule of deductions, exemptions, marginal rates, etc. Finding out, for example, if your military or out of state pension is exempt can be a challenge. As just one example of the complexity, consider Connecticut, widely regarded as a high tax state. CT has a $24,000 exemption for couples filing jointly, so for a couple with an AGI of $45,000, their tax would only be $650 – hardly enough reason to move for that reason alone. Note that since the couple’s AGI is below $100,000, Social Security income would have been tax exempt and not counted in the AGI of $45,000. Pension income will be phased out completely by 2025 (thanks to Clyde for this great information).
CT is one of thirteen states that tax Social Security, another consideration when determining state taxes. Although few states have them anymore, inheritance and estate taxes are another consideration.
Property taxes can be a very important thing to think about when choosing a new retirement state. Most states in the Northeast and Mid Atlantic states have high property taxes, while most in the Sunbelt have low ones. That issue, along with climate, are among the reasons why no states from those areas made this list.
Climate and the terrain
The Sunbelt is a big magnet for retirees looking for a warm place to spend their winters, and that preference can be seen in this list. Mountain states are attractive for their climate, beauty, and outdoor recreation possibilities. That is surely one reason why Oregon made the list, and why Topretirements Members have so much interest in Wyoming, Colorado, and Montana.
Cost of living
It is no accident that eight of the states on this list have lower than average cost of living, with Alabama and Tennessee in the lowest 10. Retirees are looking to stretch their available dollars to make the most of their retirement. Moving from a high cost area to one where housing and taxes are lower is a good way to leverage those differences for a better lifestyle.
With the resurgence of Covid and its refusal to go away, vaccination rates and Covid protection measures might be a new consideration for some retirees. Even though 91% of people over 65 in the U.S. have had at least one shot, the chances of getting a breakthrough case are higher in some states. Of the states with the highest net migration, Florida is the only one with at least average vaccination rates, while Idaho, Tennessee, Alabama, and South Carolina have very low rates of vaccination. Texas and Florida have refused to allow local governments to impose Covid health protections even though their hospitals are almost at full capacity with Covid cases.
Before you know what your best retirement state is, you have to know what you are looking for. In our book it is lifestyle. But which state or town will give you to live the retirement lifestyle you want? You can use our mini-retirement guides to find out more about the states you are considering.
For further reading:
Best States for Retirement 2014 – MultiFactor Analysis
Worst States for Retirement 2018
Best States for Retirement 2012
Most Tax Friendly States for Retirement
Best States for Retirement – Most Popular
Comments? What do you think is the best state for your retirement? Please share your thoughts as to why in the Comments section below.