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 even plenty of flexible job opportunities by the sharing economy that can help pay the bills during a transition.
The best states to live in have a combination of low taxes and incredible weather. California is awesome, but our taxes are horrendous and we’ve still got a budget deficit! 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 spent 10 years on the East Coast before moving out West in 2001. I’m totally biased for California and Hawaii so I enlisted FS reader, Steve from Green Diet to help me put together an unbiased assessment of our country based on cost of living to see which states are best for retirement.
TAXES IN AMERICA
Steve: As per Sam’s previous post about the biggest factors in 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), but in actuality, taxes are our numero uno expense.
Let’s take a look at the Federal Income Tax brackets for 2019:
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.
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
It’s Sam here again, and I’ve decided to create my own charts to provide more analysis for you guys. Let’s first take a look at the states with the lowest tax burden for residents according to the US Census Bureau.
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.
Now let’s look at the states where there are the most millionaires. Millionaires should be more mobile than others, all else being equal. Therefore, it is logical to conclude that millionaires would move to the states that provide the best lifestyles and not stay stuck in hell. No surprise, Hawaii has the most number of millionaires per 1,000 household in the country.
The final result is to compile the highest ranked states on both charts to come up with the best states for retirees!
WHY NOT LIVE IN A NICER STATE?
Steve: My parents are just over 50 and currently reside in Connecticut. Not for long, however, as they can retire comfortably now with a simple relocation. Here in Connecticut they have taxes for everything: state income tax, corporate tax, unemployment tax, property tax, car tax, sales tax, etc. In fact, we are ranked the 3rd highest in the nation for the amount we are taxed. My folks both have 401(k)s which they have steadily contributed to over the years and my father has a modest pension from working with a utility company.
They made the decision to sell their $300k home to move into a newer, nicer, and just a tad smaller house in Port St. Lucie, Florida. They paid $120,000 cash. They were astonished how cheap the housing is in Florida. Not only that but the cost of goods are significantly lower in Florida, alongside no state income tax and my father’s pension will not be taxed as well.
It really was a no brainer for them. They could continue to work another 10-15 years if they wanted to stay in Connecticut or retire comfortably now in a warm area, in a newer and nicer home with a pool. They are both very happy with their decision and the quality of their lives will go up exponentially by getting out of the hustle and bustle of trying to make a living in Connecticut.
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Updated for 2019 and beyond