Are you wondering which states are best for retirement? As a retiree since 2012 let me share the best states for retirement based on taxes, weather, and lifestyle. My method for calculating the best states for retirement are objective and intuitive.
In retirement, you want to live in a place that has reasonable taxes. Every day, you’d love to go outside and enjoy nature. Further, you’d love to have great food and entertainment activities. Clearly a state like Hawaii is in the top 5 due to its amazing weather and wonderful pace of life.
However, let’s determine the best states for retirement with a little more objectivity using taxes and lifestyle as key variables. It doesn’t matter if you retire rich if your state has bad weather, poor culture, high taxes, and bad laws.
Which States Are Best For Retirement?
America is amazing because we’re free to relocate anywhere in the country that suits our desires. A lot of people scoff at the idea of just moving because of family and job responsibilities.
But when you can take a plane anywhere in the continental US in under six hours, telecommute from home, and FaceTime with people you care about, why wouldn’t you at least give moving to a nicer place a shot? There are now plenty of flexible work from home opportunities thanks to the global pandemic.
The best states to live in have a combination of low taxes and incredible weather. California is awesome, but our taxes are horrendous. Hawaii is also amazing, but food and housing are also costly. At least Hawaii’s sales tax is only 4-4.5% and pensions are state tax-free.
I’ve been to a large majority of the 50 States and hav spent 10 years on the East Coast before moving out West in 2001. I’m biased for California and Hawaii. To me, the best state for retirement is Hawaii, if you can afford it. However, it’s time to get objective for the greater good of all Americans.
For a better life in retirement, be willing to relocate.
Taxes Are Important When Considering Best States For Retirement
When we calculate cost of living, we typically think of 1) Housing (rent or mortgage), 2) Car (loan payments and interest), and 3) Education and Child Care (student loans or child schooling). However, in actuality, taxes are usually the number one largest ongoing expense.
Let’s take a look at the Federal Income Tax brackets for 2022. Let’s hope they don’t go up too much under Joe Biden. But if you are making over $400,000 a year, Biden has promised to raise your taxes. T
axes must be considered when trying to determine the best states for retirement. You also have to understand whether there is state income tax, the level of property tax, social security tax, and so forth.
State Income Tax Rates
From a previous post regarding our polled incomes (2,400+ votes), the vast majority of readers here are going to be taxed at the 25%-33% rate federally. After Uncle Sam gets his cut, we need to take a look at individual states and the associated income tax.
Let’s take a look at state income tax rates to get an idea of how much citizens are taxed around the country.
As we can see the grey states represent those with no state income tax and the lighter the purple, the less overall income tax for the top brackets. However, we also need to take into account that some states with no income taxes are going to make it up at the gas pump or via higher property taxes i.e. Washington State, Texas, and New Hampshire.
Overall, the cost of living tends to be a lot more in cities where people would like to live and be by the coasts. We also need to consider our #1 largest expense aside from taxes, which is housing. Median home prices vary significantly from state to state.
Cheapest And Most Expensive States For Home Prices
The bottom 10 range from $125k-155k and include (cheapest to most expensive): Ohio, Michigan, West Virginia, Tennessee, Kentucky, Arkansas, Nebraska, Oklahoma Georgia and Iowa.
The top 10 range from $237k-471k and include (cheapest to most expensive): Oregon, Maryland, Colorado, Washington, New Jersey, Virginia, New York, California, Hawaii, and Washington D.C.
The following chart below is the median household income by state.
Money is basically made on the coasts with lots of it coming in from San Francisco, NYC, Boston and D.C. Therefore, it costs an arm and a leg to live around these metros. A median house in SF is going for around $1.1 Million, for example. It would be damn hard to make a living and reside in the SF Metro if one isn’t making $200,000 or more.
I really like the $200k figure, as it also represents roughly the current median household price in America. The American dream is pretty much about home ownership, freedom, and comfortable living. We want to be able to work hard and be free with a roof over our heads that we own. So with that said, let’s delve into some states really worth exploring if our income isn’t specific to a geographic region.
The Most Attractive States For Retirees
Let’s first take a look at the states with the lowest tax burden for residents according to the US Census Bureau. Below are the best states for retirement based on the lowest tax rates.
States With The Lowest Taxes To Save Retirees Money
Florida – No income tax, low cost of living, and warm weather.
Arizona – Low state income tax, low cost of living, and warm weather.
Nevada – No income tax, low cost of living, and warm weather.
Texas – No income tax, super low cost of living, and warm weather.
Wyoming – Wyoming is unique in that it doesn’t tax any income, including retirement and social security. Sales tax is a mere 4%, there is low cost of living and wide open spaces.
South Dakota – If freezing temperatures and being in the middle of the U.S. don’t bother you, in similar fashion to Wyoming, this is one of the best states for retirement.
Alaska – Also has no income tax, but it’s far away from the mainland, cold, dark, and not cheap due to the importation of goods.
Related: States That Don’t Tax Social Security Benefits
States With The Most Millionaires For Retirement
Now let’s look at the states where there are the most millionaires. Millionaires are more mobile than others, all else being equal. Therefore, it is logical to conclude that states with more millionaires provide better lifestyles. After all, if you’re a millionaire, you’ll want to use your resources to live the best life possible.
To nobody’s surprise, Hawaii has the most number of millionaires per 1,000 household in the country. New Jersey and Connecticut have a lot of millionaires given a lot of residents make their money from NYC.
States With The Lowest Taxes And Most Millionaires For Retirement
The final step is to compile the highest ranked states on both charts to come up with the best states for retirees! Below are the states with the lowest taxes and the most number of millionaires. As a result, these states are objectively the best states for retirement.
Related: States With No State Tax Or Inheritance Tax
Live In A Nicer State Already
If you’ve spent a lifetime saving, investing, and working, it’s time to reward yourself with a fantastic retirement. Please don’t live in a state with high taxes and a higher amount of crime and poverty. America is a big country. Time to move to a better state!
Given I’m OK with paying a lot more taxes than the average citizen, Hawaii continues to be my number one state for retirement. Every time I go back to Hawaii, I get happier. My stress level goes from a moderate 5 or 5 out of 10 to a 2 or 3.
If you want a combination of lower taxes and a nicer lifestyle, Florida is a great state for retirees. But I wouldn’t count out Nevada, since Nevada also has no state income taxes. Given how slow Nevada was in counting the ballots during the 2020 presidential election, its extremely slow pace of life might be exactly what retirees want!
Where I Plan To Re-Retire
Ever since the global pandemic began, I decided to work again. I didn’t go back to a traditional day job. Instead, I decided to work on Financial Samurai. Since a lot of fun activities were and are still closed, I decided to find ways to make more money online.
However, once I get vaccinated and there is herd immunity, I’m done with work. I even put together a pre-retirement checklist that is even better than the first.
I’m happy to re-retire in California for the next couple of years. I think it’ll be fun to explore this great state while my baby daughter gets stronger.
But by 2023, my plan is to retire in the best state in America: Hawaii. Hawaii is such a wonderful state. I immediately feel less stressed every time I’m there because the culture is more laid back. Maybe I won’t fully retire, but fake retire instead by working on my passion projects. But either way, I plan to retire in a state with great weather, chill people, and a slower lifestyle.
Here in San Francisco, everybody is talking about how much money they are making from their investments. There’s a non-stop hustle culture which I want to escape. People are seriously too type-A ambitious here.
Of course, taxes, weather, and where the richest people want to live aren’t the only factors that determine the best states to retire. There are other considerations such as climate change, diversity, and politics are other considerations. Choose the factors that are most important to you.
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Earn More Income Through Real Estate
Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Further, real estate is a great way to earn more passive income in retirement.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
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Which States Are Best For Retirement is a Financial Samurai original post. I’ve been helping people achieve financial freedom sooner, since 2009.
[…] The Best States For Retirement Based On Taxes And The Amount Of Millionaires […]
Stacy Stevens says
I was a little taken back that in this article nothing was mentioned about climate change. Do you feel that plays a part in retirement as to where you chose to move?
Financial Samurai says
There are many factors to determine the best state for retirement. I focused on taxes, weather, and where the wealthiest people want to live.
Climate change can certainly be a factor, with the wildfires in the west and the hurricanes in the southeast.
Grand Solar Minimum is continuing mini ice age. AGW is political science not science. All weather changes are solar based. Our activities on the earth are minimum as per thermodynamics. The current volcanic activity far eclipses any human activity.
How about adding a column on neighborliness or humanness? Just like niceness of Hawaiians, looking for continental US States where humans at least say hello to each other when they meet on the streets. What States still hold a community-like behaviors?
I live in NorCal; nice weather, great outdoors, fine job. Money talks rule in most friends gatherings. On my street, no one steps outside and if they do, rarely or no greeting.
This first-generation US citizen single empty-nester with two kids in the Army often feels living on a planet with no humans. :-)
J. Gordon says
If you want to claim Florida as your primary resident, does it mean you must be there continually 6 months and one day in a row? Or can you break up that time in different places, but still have a total of 6 months and one day in Florida.
Hi, I’v read most the comments on here!
I see you are high on living in Hawaii? Question?
Just renting on maui, I’m looking into a 55 older community with rent and all utilities being locked in
At $3400 month! I’m done with home or condo buying,
You think it makes sense to live the next 20 years in Hawaii on $45-48 gs a year that includes my SS AND investment withdrawals.. just wanting you opinion..
For people who are seeking a warmer weather and a laid back lifestyle Texas is the ideal destination. Texas has the most affordable hosing, lower tax rates, and ample of leisure activities. Along, with that cities like Sugar Land offers both business as well as job opportunities for retirees looking to launch a second career. Along, with that the state also houses some of the best hospitals and doctors, which can help you manage your health condition and that too at an affordable rate.
I left Texas because their property taxes are insane. I currently live in Scottsdale, Arizona which has really low state taxes, property taxes are about 1/4 of what I paid in Texas, and they have extremely low property insurance.
$120k for a nice home with a pool? In Port St. Lucie? I actually have been looking at real estate in that area for quite a while. If anyone sees that deal, or anywhere near it, please let me know, because I have seen nothing close. This sounds like one of those imaginary tales that are just created to make a point.
Brian, Financial Samurai doesn’t date their articles, but this was originally published in 2015. (Based on some of the comments.) Prices change a lot in five years.
Joanne Rang says
What’s your take on retiring in VA or NC? I live in VA now, but thinking of moving to NC. Are they about par from a retirement standpoint on taxes
Financial Samurai says
Doesn’t seem like it’s worth it. Very on par. Why not try somewhere more exciting and different?
The Cape Fear Region of NC is a great place to retire to. Three seasons no boiling summers water baches very low RE tax. Count all the Raleigh and Charlotte second homers and you have millionaires paradise. .
Michael Crumley says
Sam, this is a good start. Maybe this is an idea for an article on Digital Nomad lifestyle. With so many folks being digital nomads living the full-time RV life we are fortunate here in the US to be able to change our Domicile and for tax purposes reside out of South Dakota, Wyoming, Alaska or Texas – yet travel anywhere and work on the road. Digital nomads can travel to Cali or Hawaii or Costa Rica or wherever…yet for tax purposes tethered to the State that offers them the best deal for their nomadic, AirBnb, or full-time RV lifestyle.
We relocated from New Jersey to South Florida in 2012. I was 57 and my husband 59. We loved the mild winters in Fl! However, we had a four bathroom, four bed (two of which were suites) and a full finished basement with inground pool just 10 minutes from the Jersey Shore when we bought a beautiful new concrete block home just 10 minutes from Florida beaches. The Florida home cost more than what we sold our NJ home for a lot smaller house and property with no pool. Property taxes ran about the same, give or take a few bucks. At that time, gas was about a quarter less in Florida but not any more since NJ increased their tax rate on gasoline. Overall, we didn’t see much difference other than the fact that we didn’t have the bitter cold winters and that was what made our decision. Any tax benefits didn’t really affect us. Unfortunately, between the ridiculous out of control home owner’s associations in the state of Florida and the hurricanes, we felt we needed a break and again relocated to the Carolinas. Although we were, indeed warned about the homeowner’s associations, we were still blindsided by egos so I would definitely warn potential buyers to do their homework with 1) what is the capital contribution, 2) is it corporate managed or homeowners who manage (I would personally suggest corporate management), 3) has a reserve fund been established and if so, how much $ is there, 4) who is responsible for street lights, storm drains and roads, 5) is it gated, staffed or unstaffed and if so is their a wall going around the community to prevent people simply walking into the development to rob you? 6) Is it deed restricted, 7) Ask to see and review the annual budget so you can physically see the monthly expenses that the HOA has and how much it will cost you out of your monthly budget. Remember the realtors and sales people are there not to necessarily be honest but simply sell you a house. Example…the saleswoman was working hard to sell us an inventory home on a pond (Florida calls them lakes). We explained that we weren’t interested and when asked why, I responded that I was not interested in alligators in our backyard. Her response was and I quote, “there aren’t any alligators in this water”! Please know alligators are in Florida and in all the waterways. They move through those waterways constantly. Anyway these are just a few questions that should be asked to lessen the surprises. Our HOA fee was $2,800 a year and the community had no pool or clubhouse! It covered the cost of lawn care, building a reserve fund, maintaining the so called “lakes”, the unstaffed gate that was constantly breaking and the preserve along with the roads, storm drains and street lights. Do you get a tax waiver since these things are not maintained by the city through property taxes. The answer is no.
Where are you and your wife now? We are in MD and try to find a tax friendly place to retire: FL (humidity, hurricane & sinkholes), TX (Austin/Dallas), NV (Las Vegas). There are pros and cons of each place and we have a hard time to decide.
What do you think of southern utah for retirees? We’re looking at Ivins and it looks new and better than Henderson for the price.
Lived in southern Utah for 16 years. The only problem is a series of new progressive tax overhaul is coming for 2020. Lots of poverty in southern Utah and guess who has to pay for it all?
Do you know what the “Tax overhaul” is all about in Utah for 2020?
You should make an update 3 years later.
This is a great article you wrote then.
Even more relevant since you want to go more passive and a little closer to passive retirement.
Interested how your son would impact the location.