This article will check out the 20 best states to live in after retirement. If you wish to skip our detailed analysis on an unprepared retirement and the best states to retire to, you may go to the 5 Best States to Live in After Retirement.
An Unprepared Retirement
Almost everyone aspires to embrace retirement, relishing a period of well-deserved peace and relaxation. Sadly, not everyone can afford to live this retirement dream. According to Charles Schwab Corporation (NYSE:SCHW), seniors are recommended to retire anywhere between the full retirement age and the age of 70. By doing so, they can avail themselves of the maximum social security benefits, even though the fund itself is at risk of depletion by 2033. On top of the risk of depleting funds, escalating inflation, substantial depreciation in 401(k) accounts amounting to over one-third of their value, and the financial support extended to grown children has compelled retirees to persist in the workforce despite their old age.
According to the Bureau of Labor Statistics, the labor force participation rate of people aged 75 or older is expected to rise from 8.9% in 2020 to 11.7% by 2030. By this time, all baby boomers will be 65 years of age or older, and the civilian labor force older than 65 will be an estimated 9.5%. These figures imply that not only is the share of older people in the labor force rising, but the participation rates are also increasing in number.
2022 also saw hardship withdrawals increasing by 36% as compared to the previous year. Charles Schwab Corporation (NYSE:SCHW) greatly asserts that while 401(k) loans may give access to cash, they diminish your retirement savings. You lose out on the potential for tax-deferred growth on such savings, and may even have to sell stocks or bonds at an unfavorable price.
Your decision regarding where to retire also has an impact on your retirement savings. According to Insider Monkey, the worst states to retire to are Hawaii, Massachusetts, California, and New York. Not only do these states have extremely high costs of living, but other states offer a better tax climate than they do as well. California also makes it to our list of worst states to retire in for taxes, fully taxing retirement account incomes and pensions at some of the highest income tax rates in the United States.
Best States to Live in After Retirement
Smart retirees know that the best states to live in after retirement are those that provide the best balance between cost of living and taxes. This balance ensures that they are able to stretch their retirement incomes the farthest they can. We crafted a list of the best states to retire in for taxes and cost of living in order to decipher the states that offer the ideal balance between the two.
According to our findings, the top 10 states to retire in are Georgia, Illinois, Tennessee, West Virginia, Arkansas, Alabama, Missouri, Kansas, Oklahoma, and Mississippi. Mississippi, Oklahoma, and Alabama are not only some of the cheapest states to retire in, but are also some of the most tax-friendly states in the nation.
Retiring in these states will allow retirees to live cheaper, and many places within will even allow retirees to comfortably live on their social security paychecks. Nevertheless, it is important for potential retirees to start saving as early as possible in order to save enough for a comfortable retirement. One major tip recommended by Charles Schwab Corporation (NYSE:SCHW) includes working with financial advisors. Schwab asserts that having a financial advisor allows retirees to nearly double the amount they are saving for their retirement.
Without further ado, let’s move to discover the best states to live in after retirement, offering the best in taxes, living costs, popularity, and healthcare.
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Methodology
In order to come up with the list of the best states to live in after retirement, we picked the 25 best states to live in for taxes and cost of living. Next, we scored them (out of 25 each) on their tax friendliness, cost of living, healthcare quality, and popularity (% of seniors living in the state).
Cost of living has been sourced from Missouri Economic Research and Information Center, while healthcare quality has been sourced from Agency for Healthcare Research and Quality.
The scores were summed up to come up with a unique Insider Monkey score with an upper bound of 100 points. States were ranked in ascending order from the lowest to the highest scores.
Here are the best states to live in after retirement:
20. Louisiana
Insider Monkey Score: 52
One of the best states to live in after retirement is Louisiana. The state is overall tax-friendly, with no taxes on social security or pension incomes. Property taxes are well below the national average, and the state also boasts an affordable cost of living that is 8% lower than the national average. 17% of people who are 65 or over live in the state.
19. Georgia
Insider Monkey Score: 53
Georgia, one of the best states to retire in for taxes and cost of living, is home to a thriving senior community comprising 15.1% older adults. The state is very tax-friendly; it does not tax social security retirement benefits and has moderate levels of property and sales taxes too. The cost of living is 9% lower than the national average.
18. Indiana
Insider Monkey Score: 55
The moderately tax-friendly state of Indiana is home to 16.9% of the senior population. Residents get to enjoy an affordable cost of living, that is 8.5% lower than the national average. The state doesn’t tax social security retirement benefits. However, other forms of retirement income are taxed, such as pension income and retirement savings accounts. Property taxes in the state are some of the lowest.
17. Oklahoma
Insider Monkey Score: 58
Another one of the best states to live in after retirement is Oklahoma. Retirees get to enjoy a tax-friendly climate. There are no social security taxes, and property taxes are low too. Sales taxes are high in the state. However, a 14% lower-than-national average cost of living makes up for it. 16.4% of seniors aged 65 and over live in the state.
16. Tennessee
Insider Monkey Score: 60
Retirees looking for the best state to live in after retirement should consider Tennessee. The state is tax-friendly for retirees, with no income taxes and low property taxes. Sales taxes are higher than the national average, and the state could also improve in terms of healthcare quality. However, the cost of living is 9.6% lower than the national average, making it desirable for the 17.3% of seniors living in the state.
15. Kentucky
Insider Monkey Score: 63
Retirees in Kentucky enjoy a tax-free social security income. The tax-friendly state also boasts some of the lowest property and sales taxes. The cost of living is 6.2% lower than the national average, and 17.6% of seniors enjoy living in the state.
14. Arkansas
Insider Monkey Score: 64
The tax-friendly state of Arkansas is another one of the best states to live in after retirement. The state enjoys a low cost of living, at 9.7% lower than the national average. There are no taxes on social security benefits, and public and private pension incomes are partially taxed. Property taxes are low as well. The state also houses a thriving senior community, with 17.8% of seniors living in it.
13. Florida
Insider Monkey Score: 65
Florida may not rank at the top in terms of healthcare quality, but it is certainly a popular state to retire to. 21.2% of seniors call it home, thanks to its affordable living and very tax-friendly climate. The state has no income tax. Therefore, all sorts of retirement income go untaxed to retirees. The cost of living is 2.3% higher than the national average, but there are many budget-friendly places in Florida where retirees can live cheaply.
12. Illinois
Insider Monkey Score: 67
Illinois is a tax-friendly state to retire to, and almost all types of retirement income in the state go untaxed. The state does have some of the highest property and sales tax rates, but the 9.2% lower-than-average cost of living does well in offsetting its impact. It fares well in terms of healthcare quality as well, and 17.2% of seniors thrive in the state.
11. Kansas
Insider Monkey Score: 68
Kansas makes it to our list of best states to live in after retirement, largely due to its cheap cost of living. Living costs are 12.3% cheaper than the national average, making it significantly cheaper than other states in the US. Social security income goes untaxed on an adjusted gross income of $75,000 or less. Property and sales taxes are high, and the state fares moderately well in terms of healthcare.
10. South Carolina
Insider Monkey Score: 69
The tax-friendly state of South Carolina does not tax social security retirement benefits. A $15,000 taxable income deduction is also provided to seniors receiving other types of retirement incomes . Property taxes are well below the national average, while the cost of living is inexpensive as it is 3.5% lower than the US average. 19% of seniors call it home.
9. Pennsylvania
Insider Monkey Score: 69
Pennsylvania is one of the most popular states to retire to, with 19.1% of seniors living in the state. The state is tax-friendly, with no taxation on social security income or income from retirement accounts. Property taxes are high in the state, but sales taxes are relatively low. The cost of living is 1% lower than the national average, making it both affordable and desirable for living.
8. South Dakota
Insider Monkey Score: 70
The very tax-friendly state of South Dakota is no less than a haven for retirees. There is no state income tax, which is why all retirement incomes go tax-free. Sales taxes are low, while property taxes are on the higher side. The cost of living in South Dakota is 6.2% lower than the national average, making it affordable to 18% of the senior population.
7. Missouri
Insider Monkey Score: 73
Another retiree-friendly state making it to our list of best states to live in is Missouri. While the state may be moderately tax-friendly, it boasts one of the lowest cost of living figures in all states. Living expenses are 11.6% lower than the national average, and 18% of the population comprises seniors. Social security income in Missouri is partially taxed, while retirement account withdrawals are fully taxed.
6. Michigan
Insider Monkey Score: 73
Michigan rules in favor of retirees because of its tax-friendly climate and affordable cost of living. Social security income in the state isn’t taxed, and the state provides deductions on all other types of retirement incomes. The cost of living in the state is 7.3% lower than the national average. The state ranks well in terms of healthcare quality.
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Disclosure: none. 20 Best States to Live in After Retirement is originally published on Insider Monkey.
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