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What States Are the Most Welcoming for Retirement?

Category: Best Retirement Towns and States

December 17, 2019 — If you are shopping around for the best state to retire in, the good news is that there are a number of states that would really like you to choose them. These states know that the homes retirees buy and the money they spend locally represents an important and clean industry. So they have taken steps to make themselves attractive to retiring boomers.

States like North Carolina, Nevada, Florida, and Texas don’t have a problem attracting retirees. They have a good reputation and many attractive places to retire. Others, such as West Virginia and Mississippi, have a harder time bringing in retirees without incentives. In this list we will concentrate on states that have taken specific steps to increase the number of people retiring in those states. .

13 States That Do the Best Job of Attracting Retirees
Our list includes most of the states that have no income tax, with one exception. We excluded Alaska because it is such an expensive place to live and so cold in winter. Here are 13 states that have gone the extra mile in their efforts to bring in retirees.
Florida. No income or estate tax. Amendment 10, the Save our Homes Act, is a top notch program that protects homeowners from big property tax increases. The Sunshine State has a warm winter climate, extremely long coast line, and an endless list of towns where retirees can find things to do and communities to welcome them.

 Nevada. No income tax or estate tax.  In Las Vegas and Reno there is plenty to do and hundreds of active adult and 55+ communities.  Winters are warm and outdoor recreation and scenery in the mountains is excellent.
South Dakota. No income tax, no income or estate tax.  Winters aren’t so great here, but there are some nice places to live, a strong economy, and many attractive places to live.
Texas. No income, estate or inheritance taxes. Texas is one of the few states with a Certified Retirement Community program, which aims to make towns in the state more attractive to retirees.
Wyoming. No income tax, no estate or inheritance taxes. Plus a strong economy and some great recreation in the Rocky Mountains and National Parks.
Louisiana. The State has a Certified Retirement Community program, no estate or inheritance taxes. Cost of living is low. Fishing, hunting, and boating are top notch.
Mississippi. The State has a Certified Retirement Community program and some of the lowest property taxes in the nation, no estate or inheritance taxes. Cost of living is very low. 
North Carolina. Certified Retirement Community program, no estate or inheritance taxes. Out of state retirement income is generally taxed.  The State has a great variety of places to retire – from the Atlantic coast to the interior to the mountains around Asheville.
Tennessee. It has the Retire in Tennessee Program and no estate or inheritance taxes. The State tries a lot harder than almost any state to bring retirees to this friendly state.  It does tax unearned income like dividends and interest, but these are generally not an important source of income for most retirees.
West Virginia. It has a Certified Retirement Community program, and no estate or inheritance taxes. Social Security is taxed, however, so that is a potential negative.  Outdoors in West Virginia there is a lot to do, and real estate prices are attractive.

Washington. The State has no income tax, although there is an estate tax. Real estate prices in the western part of the State are very high, but retirees can enjoy a wonderful lifestyle in this varied state.

 Georgia. The Peach State does have an income tax, but because it offered a very generous $65,000 per person exclusion for people over 65, not many retired folks would have to pay income tax. Winters are pretty warm here.

Kentucky. The State has a high ($31,110 per person) retirement income exclusion. The state has a lower cost of living, which should appeal to retirees struggling on a budget.

Taxation of pensions

Some other states are welcoming to retirees with breaks on pension taxation, although what they include and exclude can be tricky (military, government, and in-state pensions are most often excluded in whole or part).  If taxes are important to you in retirement, before you decide on a state it’s a good idea to do some research, or even prepare a sample tax return.

States that are not so friendly to retirees
States that tax Social Security benefits are easy to single out as being non-friendly to retirees. There are 13 of those: CT, CO, KS, MO, MN, MT, ND, NE, NM, RI, UT, VT, and WV (some of these exclude a portion of these benefits, and WV will phase it out completely beginning in 2020). Although the taxes you might pay on Social Security are probably not going to break the bank, it does not make a “retirement-friendly” statement to tax them.

Homestead and other Property Tax Exemptions
Although almost all states and many cities have some type of program to control or reduce property taxes on people over 65, most of them are extremely limited and pertain only to people with limited incomes. However a few have taken action that protect practically everyone, not just those with low incomes or over 65. Two of the most far-reaching programs are in California and Florida, and they definitely help retirees. It is worthwhile checking when considering a state or municipality to see if you might qualify for property tax relief – it can make a difference.

California’s Proposition 13 restricts annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. However if you sell your home and buy a new one the taxes will be computed on the value at the time of purchase, so the law tends to discourage people from moving. Florida’s Save Our Homes program limits the annual increase in assessment so that it does not exceed the lower of the following:
a. Three percent of the assessed value of the property for the prior year; or
b. The percentage change in the Consumer Price Index (CPI)

Estate and Inheritance Taxes
Since retirees are in the last third of their lives they should be thinking about how their estates might be taxed. Although federal inheritance taxes now really only affect a tiny percentage of the wealthiest Americans, some states are not so kind.  Six states have an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Thirteen states plus Washington, D.C. have an estate tax; Maryland has both an estate and an inheritance tax. A few of these are in synch with the federal estate tax exclusion, which is now quite high ($11.4 million in 2019). However some states, particularly in the Northeast, start taxing estates at much lower levels. Those states should not be viewed as retirement-friendly, at least for people with larger estates. States that tax estates include Connecticut, Hawaii, Illinois, Iowa, Kentucky, Maine, Minnesota, Nebraska, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Washington, D.C.

Encouragements that go beyond taxes
Six states have established Certified Retirement Communities to encourage retirees to settle in their states. Those programs typically require each city to meet certain criteria including affordable cost of living, low taxes, low crime rate, quality medical care, recreation, educational and cultural opportunities – and most importantly, a warm, inviting community spirit. Those states include Texas (with 50 or more cities in the program), Louisiana (5 towns), Mississippi (15 towns), West Virginia (6 areas), Tennessee (19 rural and urban communities), and North Carolina (13 communities). Kentucky had a certified program but it appears to be inactive.

Bottom Line
Where you want to retire is always more important than any incentive that might come your way.  Lifestyle and proximity to friends or relatives can be much more important than taxes or other economic factors. The same goes for healthcare and climate.  But, if all things are equal, you might consider retiring in a state that goes out of its way to invite you there with its policies and programs.  In the case of the states above, you can be confident that they want retirees and have many good reasons for you to retire there.

For further reading
Most tax-friendly states for retirement
Best States for Retirement

Comments? What do you think? In your experience do these states strike you as retirement-friendly? Do you know of other states we should have considered? Please share your thoughts in the Comments section below.

Posted by Admin on December 16th, 2019

20 Comments »

  1. Who wrote the absurd remark that stock dividends are not an important source of income for retirees? Lots of people who work hard and save invest in stocks that pay dividends as a retirement revenue stream.

    by Sandie — December 17, 2019

  2. One area that I havent seen addressed anywhere is elder and consumer protections by state. In particular, are there states that have laws/regulations to address some of the issues that arise between developers of 55+ communities and the buyers and also issues around HOAs and residents? The community we rented in in SC was starting to go thru the transition to HOA as the last few houses were built and the homeowners there had a nightmare, had to spend $$$ to high legal help and the issues are ongoing. Googling that builder and others, there are so many issues, not only with individual homes / shoddy workmanship that sometimes result in damage to the structure but also underfunded reserves that the builder was supposed to contribute to, difficulty getting financial docs prior to the handover, inaccurate financial docs with no explanation, early builder appointed HOA members who leave as soon as the development is built out but who “signed off” on changes to the master plan (in the favor of the builder), etc. etc. etc. Not to mention giant contracts that are unintelligible and not negotiable. I’ve never seen state AGs step in to help in these issues and it seems the law is in favor of the builders (makes ya wonder whose campaigns they donate to.)

    by jean — December 17, 2019

  3. Regarding comment by Sandie, your editor wrote the absurd remark about dividends in Tennessee. The full remark was “but these are generally not an important source of income for MOST retirees.” But your comment raises the point that every situation is different. For most retirees, Social Security, pension, and/or 401k/IRA income provides the bulk of their income – not having that taxed in Tennessee is a big advantage. But there are some better off people who have lots of dividend or interest income too – taxation could be a big deal for them. If that is you, good to know that it might be an issue if the state you like taxes it.

    by Admin — December 17, 2019

  4. Regarding dividends in Tennessee: the tax on investment dividends and interests are being fazed out.
    2% in 2019
    1% in 2020
    0% in 2021
    I might be off by a year? Lol
    Either way, this state is high on my retirement (in 4 yrs) list

    by Roger — December 17, 2019

  5. Jean, I found this article about HB 595 in my state, Pennsylvania, which was signed into law in 2018 supposedly to help homeowners with certain grievances. The article paints a very different picture explaining that the bill was rewritten by industry lawyers before passing. Here’s the link to add to your research:
    https://independentamericancommunities.com/2018/04/18/pa-hb595-update/

    by Daryl — December 18, 2019

  6. Why is West Virginia identified on both Friendly and Not So Friendly?

    Also where does Arizona fall? Not listed in either category, so did Arizona not meet the defined criteria for either category?

    Editor’s comment. Good point Cathy. West Virginia is mixed – positive on cost of living and Certified Retirement Community program, negative on taxing Social Security. Regarding Arizona, it is one of the better states though not at the top for friendliness. It has the 36th highest tax burden of all states. Find more in our Arizona Retirement Guide.

    by Cathy — December 18, 2019

  7. I’ve been researching retirement states and the information is misleading. Looking at Kansas, many websites state that it is unfriendly to retirees. But, if you have a federal or military pension, your income is tax free. And it is listed as one of 13 states that taxes Social Security; yes, if your AGI is over $75,000. Below this and it is tax free so read the details that apply to your particular situation.

    Editor’s comment: Great point Doug. Thanks for this extra information.

    by Doug Randlett — December 18, 2019

  8. How does Virginia stack up as being welcoming to retirees? I did not see Virginia mentioned, either positively or negatively, in the above information. Currently, I live in Western New York and I am considering relocation to either Virginia or North Carolina. Based on some of my research, it appears that Virginia is more “financially friendly” than North Carolina.

    by T.R. — December 18, 2019

  9. One aspect that I have seen added to the mix is the quality of health care in a state. There are measures that look at the number of available hospital beds and long term care beds. (Measures of quality would be good to have.) Another thing to measure might be the availability of social and recreational services. Florida has a good mix of recreational and senior services. States that have a large number of senior citizens are likely to cater to their needs.

    by Lynn — December 18, 2019

  10. Focusing only on zero-income-tax states is fool’s gold. Income tax revenue is used to run a state. Funds to run the state have to come from somewhere. Therefore, look at a state’s total tax burden to identify the true lowest tax states. It might come as a surprise to some that Delaware, which has a state income tax, has the second lowest overall tax burden of the 50 states (at 5.55% according to wallethub.com). If you really must live in the absolute lowest tax state, have fun in Alaska in the winter. Alaska’s total tax burden is 5.10% whereas New York state, with the biggest total tax rate, is just under 13%. That is a meaningful spread if — and it is a big if — you have the kind of retirement income that makes it meaningful. In essence, if your annual retirement income is, say, $100,000, you will pay roughly $8,000 more living in New York than in Alaska. For some — opera goers, major league baseball fans, those who love theater — it will be worth paying the difference. For most of us, a more reasonable tax level — Florida at 6.56% and South Carolina at 7.55% — will look more attractive. My overall points are to ignore income tax in favor of looking at total rate; and to move where you will be happiest and where you have the kinds of services you need nearby — even if you have to pay a little more for them.

    by Larry — December 19, 2019

  11. Daryl, That’s exactly the problem. I also live in Pa (Newtown) so it’s disappointing that that the state legislature and Gov ceded authority to the developers. And I dont think it’s just in Pa where the industry writes it’s own regs – (also happens on the Federal level.) After seeing what went on at the dev in SC where we rented we decided to by in a small (58 houses) 55+ that has was built out in the early 2000s, has no amenities aside from walking paths, and is run by a very responsible board.

    Larry, I’d rather (and do) pay high local taxes where I can enjoy the benefits of top notch first responders, great libraries, great schools (I have no children in them but responsible families move to great districts and that’s the kind of families I want to share a town with), etc. and LOW or no state income taxes where remote beaurocrats decide were it goes. Pa doesn’t tax retirement income and the state tax on other income is low. On the other hand, SC is a good example of high state and low low local taxes; property taxes in most areas are extremely low but petty crime is very high and worse, tolerated, the libraries even with user donations are just so-so, etc. When looking for quality of life, high state income taxes dont provide for that.

    by jean — December 19, 2019

  12. Larry is right! We retired and moved from Tenn. (supposedly tax friendly) to Maine, where we now pay some income tax and property taxes are higher. BEST decision!! We have cooler weather, excellent health care just minutes away (was a 2 hr drive in TN), free libraries that actually have books (had to PAY to use the pitiful ones in TN), roads are plowed and kept clear for any storm (were iced in for a whole week once in TN), good water & sewer, lower food costs, lower insurance costs and a more active community. We love it! Sometimes, you get what you pay for. We left our scattered kids behind and are busy and happy and enjoying ourselves immensely!

    by HEF — December 19, 2019

  13. HEF are you in Portland? It sounds good in Maine. I have also been looking in New Hampshire as I love the mountains. Vermont may be too expensive for me, but it is a lovely state no doubt about it. Walkability is very important to me as I do not wish to be tied to my car as I age. I live in DC now and everything seems higher, food, utilities, you name it. I can, however walk to things and have access to lots of things I can do for free so the trade offs are interesting.

    by Jennifer — December 20, 2019

  14. Larry – Great advice! There’s a lot to consider, it’s not straight forward comparisons across the board – apples to apples. We all need to look closely at our personal needs and wants.
    HEF so good to hear I love the Northeast as well. Yes it is more expensive then some options but in comparison to many others places has more to offer. I have noticed that places that I might like in other areas are usually somewhat comparable in cost of living except in property and estate taxes. Where in Maine did you land and did you buy a home or condo in a planned community?
    This is a great thread we have going, rich in info and ideas. Thanks!

    by Janet — December 20, 2019

  15. Doug Randlett, Topeka, Kansas is offering money to entice people to move there:

    https://www.foxnews.com/real-estate/topeka-kansas-pay-move

    by Louise — December 20, 2019

  16. Jennifer, Maine is a beautiful state. I live in Vermont & as you say it is beautiful, but very expensive, no tax breaks etc. It isn’t what I call walk able unless you live in the Burlington or larger areas but Burlington is very very expensive – if you can find housing it is very high/high property taxes. But the bus system is getting popular & spreading to various place one wants to go. We do have some excellent hospitals. NH is very nice also & better on taxes though their property is high to make up for no State income or sales taxes. I think about moving, but I do love summers (winter can last forever), my house is paid for, I live in ideal location in that I’m less than 5 miles from shopping, interstate, hospitals etc but on a dirt road (spring mud season) my home is total private with trees, lots of wild life & peaceful. I think for now will stay where I am & take off when the Winters get too long, Summers we normally headed to Maine either before or after tourist time when less people & drop in prices. The long & short of any place is there is good/bad trade offs it is what you make of it & in the long run life is too short to not enjoy what you can while you can. Seeing various posts here is a great resource, & people seem to share their experiences & be helpful. Good luck where ever you might want to go &/or searching out New England!

    by VTRetiree — December 21, 2019

  17. Hef, I have several friends who have retired to Maine and they love it too. I love Maine and might consider it when the time comes for me to move. I love the Portland area, Ogonquit, Wells, and the York area. It is just beautiful there and now there are quite a few senior citizens moving there. I think there is a train that goes into Boston which is important to me for treatments.

    by Maimi — December 21, 2019

  18. New York state rarely gets a mention in the annual lists of most retiree-friendly states, but for some categories of retirees, it really should be considered. I retired from the federal government a few years back after 33 years of service. And last year we moved from San Diego (great weather, high cost of living and taxes) to a beautiful lakefront home in the Finger Lakes area. If the difference in housing prices and choices was dramatic between Southern California and New York, the difference in tax treatment of personal income was even more so.
    California does not tax social security, a small part of our income, but it taxed all of my federal pension. New York state, on the other hand, does not tax either social security or my federal pension. And New York also has the STAR program, in which significant portions of your local property taxes are refunded based on age and income. While we moved to New York for personal and not tax reasons, the financial benefits were a really nice and unexpected plus.

    by Sheldon — December 22, 2019

  19. Maimi – If you don’t mind winter, there are SO many things to do in Maine! Even from Portland – north you would love it. There are a number of retirement communities and I suspect there will be more as time goes on. The healthcare here is excellent and yes, people also go to Boston regularly as well. Amtrak runs from Brunswick to Boston, through Portland. At least one hotel, that I know of, does a park & fly package where you can leave your car in their parking lot – they will take you to the airport and you have a place to stay overnight before you have to drive home. I thought that a great idea! There is also bus service from Portland to Boston, and the airport, that is very popular. All of that serves the coast so there isn’t as much going on in western Maine – mostly summer vacation camps. People seem to be very welcoming – just ask questions – and you’ll quickly fit in.

    by HEF — December 22, 2019

  20. Thanks, Hef. I have spent summers in Maine and I have a few friends who live there now. When I am ready to retire, if I am still healthy enough to move, Maine is on the top of my list. How are the taxes?

    by Maimi — December 23, 2019

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