Best States to Retire: Considering Tax and Cost of Living
April 17, 2026
Choosing where to live in retirement is about more than scenery or proximity to family. Whether you’re picturing mornings on a golf course, time near the coast, or simply being closer to loved ones, your decision should also account for the financial realities of that move. Where you live can have a meaningful impact on how long your retirement savings last—which is why evaluating both lifestyle and cost is essential.
Below is a practical, financially focused look at how to think about the best states for retirement in 2026.
How to Evaluate Retirement-Friendly States
Not all states treat retirees the same. Differences in tax policy, housing costs, and everyday expenses can significantly influence your long-term financial picture. To make sense of those differences, it helps to break the decision down into a few key categories.
Taxes: A Major Piece of the Puzzle
Taxes are often one of the largest variables in retirement planning. While many assume their tax burden will drop after leaving the workforce, that’s not always the case.
Most retirement income—such as distributions from IRAs, 401(k)s, pensions, and even some unemployment benefits—is still subject to federal income tax. Social Security may also be taxed federally, based on your total income. Up to 85% of your benefits may be taxable.
Recent legislation has added some relief for older taxpayers, including an additional standard deduction for those over age 65. While deductions don’t eliminate taxes entirely, they can reduce your overall taxable income.
At the state level, however, the landscape varies widely. Some states impose no income tax at all, while others may tax retirement income at relatively high rates.
States with No Income Tax
● Alaska
● Florida
● Nevada
● New Hampshire
● South Dakota
● Tennessee
● Texas
● Washington
● Wyoming
Living in a no-income-tax state can be appealing, but it’s not always a clear-cut win. These states often make up revenue in other ways—such as higher property taxes, sales taxes, or insurance costs. Climate and accessibility may also factor into your decision.
Even if a state does tax income, it may still be considered “retirement friendly” if it offers exemptions for Social Security, deductions on retirement income, or low property taxes. The key is understanding the full tax picture, not just one piece of it.
Cost of Living: The Other Side of the Equation
Taxes are only part of the story. The overall cost of living—housing, healthcare, groceries, and transportation—can vary dramatically from one state to another.
In many cases, states with lower taxes aren’t necessarily the most affordable places to live. That’s why it’s important to evaluate your total monthly expenses, not just your tax bill.
Generally, states in the Midwest and South tend to offer lower overall living costs, while the Northeast and West Coast skew higher. Places like Hawaii and Alaska often rank among the most expensive due to geographic and supply constraints.
Some of the Most Affordable States
● Oklahoma
● Mississippi
● West Virginia
● Alabama
● Kansas
● Missouri
● Iowa
● Arkansas
● Tennessee
● Indiana
Lower costs in these areas can make a meaningful difference, particularly for retirees living on a fixed income.
States That Stand Out Financially
When you pair tax benefits with low costs, a few states often stand out for retirees.
Mississippi
Mississippi ranks highly as a retirement-friendly state largely due to its favorable treatment of retirement income. While the state levies income tax on some earnings, it excludes Social Security benefits. It also excludes most retirement account withdrawals, including pensions, IRAs, and 401(k) distributions. This can reduce or eliminate state tax on typical retirement income sources.
On the cost side, Mississippi also performs strongly. Housing costs and property taxes are among the lowest in the country, helping it secure a top-tier ranking for overall affordability.
Another advantage is estate planning. The state has no estate or inheritance tax. This can help when passing assets to heirs.
The primary drawback is relatively high sales taxes, which can increase day-to-day expenses. Even so, Mississippi remains one of the more financially favorable options for retirees overall.
Arkansas
Arkansas stands out as a retirement destination largely because of its affordability. It consistently ranks among the more budget-friendly states, with below-average costs for housing, groceries, and transportation.
From a tax perspective, it offers several retiree-friendly features. Social Security benefits are not taxed.
Property taxes stay relatively low. The state does charge income tax, but rates are modest. Retirees can also take advantage of a deduction on retirement income—up to $6,000 per individual or $12,000 for joint filers each year.
Although other states may offer more generous tax breaks, Arkansas helps make up for it with an overall lower cost of living, allowing retirement savings to go further in day-to-day life.
Tennessee
Tennessee is especially appealing from a tax standpoint because it does not impose a state income tax on wages or retirement withdrawals. That means your savings, pensions, and other retirement income are not reduced by state-level income taxes.
Beyond its tax advantages, the state also tends to be relatively affordable. Property taxes are low, and housing costs remain below the national average in many areas. With its lower cost of living, Tennessee is among the more affordable states.
This helps retirees stretch their budgets on housing, groceries, and leisure activities.
Wyoming
Wyoming may not be the first place that comes to mind for retirement, but financially it can be a compelling option. The state doesn’t levy an income tax, which means your retirement withdrawals aren’t subject to state taxation.
It also stands out for relatively affordable housing and modest property taxes. This is especially true versus other no-income-tax states. It makes it easier to keep a home on a fixed income.
That said, there are tradeoffs to consider. Healthcare costs can be higher, and access to medical services may be more limited in certain areas. If ongoing care is a priority, it’s important to weigh those factors alongside the financial benefits.
Georgia
Georgia doesn’t rank at the very top for affordability, but it still performs well, landing just outside the top tier. The state doesn’t tax Social Security benefits and has no estate or inheritance taxes. Although sales taxes run on the higher side, groceries are exempt, and property taxes remain relatively low. When you factor in generally affordable home prices, the overall cost of living is still quite manageable.
Another advantage is the state’s retirement income deduction. Residents age 65 and older can exclude up to $65,000 per person from state taxes. Those ages 62 to 64 can deduct up to $35,000. While it does not fully match the benefit of living in a no-income-tax state, it can still lower taxes for retirees.
A Few Additional States to Consider
● Oklahoma: Extremely affordable with low income tax rates and no tax on Social Security, though insurance costs have been rising.
● Florida: A perennial favorite thanks to no income tax and a retiree-friendly environment, though housing costs—especially near the coast—can be high.
The Bottom Line
There’s no single “best” state for retirement—only the one that best fits your financial situation and lifestyle priorities. While tax advantages and affordability matter, they should be weighed alongside factors like healthcare access, climate, and proximity to family.
A well-informed decision can help your savings last longer and provide greater flexibility throughout retirement. Even if your ideal location isn’t the most cost-effective on paper, thoughtful planning can still make it work.
Ultimately, the goal isn’t just to retire. It’s to retire with confidence. Your finances should support the life you want to live.
Sources:
https://www.thepennyhoarder.com/retirement/best-states-for-retirement/
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.