Retirement Cost by State: Where Your Dollar Goes Furthest in Retirement
The state you retire in can extend or shorten your retirement savings by 5–8 years. Taxes on Social Security income, property taxes, healthcare costs, and general cost of living all vary dramatically — turning the same $1 million portfolio into very different retirement outcomes depending on your zip code.
Key factors for ranking retirement-friendly states
1. Social Security taxation
Federal taxes apply to Social Security for many retirees (above $25,000 individual / $32,000 joint income). But 41 states have eliminated or significantly reduced state income taxes on Social Security benefits. The 9 states that still fully tax Social Security: Utah, Vermont, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, West Virginia, and North Dakota (varies; some have phase-out rules).
2. Pension and retirement income taxation
States vary widely in how they treat IRA, 401(k), and pension distributions. States with no income tax (Florida, Texas, Nevada, Tennessee, Washington, Wyoming, Alaska, South Dakota) don't tax any retirement income. States like Illinois and Mississippi exempt most pension income while taxing other income types.
Best and worst states for retirement finances
| State | SS Tax | Income Tax | Property Tax | Annual Retirement Cost* | Verdict |
|---|---|---|---|---|---|
| Florida | None | None | 0.83% | $48,000 | 🟢 Excellent |
| Texas | None | None | 1.60% | $51,000 | 🟢 Excellent |
| Tennessee | None | None | 0.66% | $44,000 | 🟢 Excellent |
| Georgia | Exempt to $65K | 5.49% | 0.81% | $47,000 | 🟢 Good |
| Arizona | None | 2.5% flat | 0.60% | $50,000 | 🟢 Good |
| Pennsylvania | None | 3.07% (no retirement income) | 1.36% | $53,000 | 🟡 Good |
| Colorado | Partially taxed | 4.4% | 0.55% | $57,000 | 🟡 Average |
| California | Full state tax | Up to 13.3% | 0.71% | $68,000 | 🔴 Expensive |
| New York | Exempt (SS only) | Up to 10.9% | 1.54% | $71,000 | 🔴 Expensive |
| New Jersey | None | Up to 10.75% | 2.23% | $74,000 | 🔴 Expensive |
*Annual retirement cost = estimated all-in annual expenses for a retired couple (housing, healthcare, food, transportation, taxes) using MIT Living Wage Calculator and state tax data. Healthcare estimated at $7,000–$11,000/year per couple depending on Medicare supplement costs.
Tennessee is quietly the best retirement state most people overlook. No income tax, no Social Security tax, the lowest property tax rate of any major retirement state, and cost of living 15% below the national average. Tennessee has been gaining retirees rapidly — Chattanooga and Nashville suburbs in particular have become major retirement destinations since 2021.
Don't just follow tax rates — healthcare access matters
States with the best rural healthcare access for retirees: Massachusetts, Maryland, Minnesota, Connecticut. States with the worst rural healthcare access: Mississippi, Wyoming, Alaska, Montana. For retirees who plan to age in place outside metro areas, healthcare infrastructure often matters more than tax optimization.
Calculate your retirement number
Use our FIRE Calculator to see how your savings target changes based on your expected annual spending — and what moving to a lower-cost state does to your FIRE number.
Open FIRE Calculator →Cite this article
Randive, A. (2026). Retirement Cost by State: Where Your Dollar Goes Furthest in Retirement. DecisionsCalc. https://decisionscalc.com/articles/retirement-cost-by-state/