Retiring in a New State: What to Consider Before You Relocate

Retirement is often seen as an opportunity to move to a new location that better suits your needs and preferences. You’re no longer pinned down by a job, so you can move wherever you want. Before you settle on a new state to call home, there’s a lot to consider, including the best states to retire tax-wise and the quality of living in different regions.

The Best States to Retire in for Taxes

Retirees are typically living on a fixed budget, so an unexpected tax bill can have a significant impact on quality of life. To keep as much money as possible in your wallet, you may want to move to one of the best states to retire for taxes.

Which state wins recognition as the number one best state to retire for taxes will depend on your criteria. If you want to avoid paying taxes on your Social Security retirement benefits, you’ll want to move to a state that doesn’t tax Social Security – and you’ll have a lot of options. According to Kiplinger, only nine states still tax Social Security benefits as of 2025: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia. If you live in any of the other 41 states, you won’t have to worry about owing state income taxes on your Social Security retirement benefits, although you may still owe federal income taxes.

But what about taxes on other sources of retirement income? According to Thomas Reuters, eight states do not tax any income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming. Nine more states don’t tax pensions: Alabama, Hawaii, Illinois, Iowa, Mississippi, New Hampshire, Pennsylvania, Rhode Island and Vermont.

The Best States for Retirement: Taxes on Property

Property taxes can pose a risk to retirement budgets. If property values increase sharply, your property taxes could surge. Seniors on a fixed budget may not be able to keep up with rising property taxes, putting their homeownership in jeopardy. While this may not be a concern if you plan to rent in retirement, if you want to own your home, it’s worth considering.

According to Realtor.com, 16 states have property tax exemptions for qualifying seniors: Alabama, Alaska, Colorado, Florida, Georgia, Indiana, Iowa, Kentucky, Mississippi, Nebraska, New York, North Carolina, Ohio, South Carolina, Texas and Washington. The District of Columbia also offers an exemption. These exemptions don’t typically exempt seniors from 100% of property taxes owed, but they do tend to exempt a large dollar amount or a significant percentage. Even more states offer property tax credits or tax freeze programs for seniors.

Easing the Income Tax Burden

If you’re starting to worry that taxes will eat up too much of your retirement budget and make many places unaffordable, pursue retirement strategies that reduce your tax burden. One way to do this is to choose a tax-advantaged source of retirement income.

Annuities are a popular option. Annuities enjoy tax deferred growth, so you don’t have to worry about paying taxes on investment returns until you make withdrawals. Furthermore, if you’ve purchased your annuity with after-tax dollars, you only pay taxes on the earnings when you make withdrawals. Any principal amount that you withdraw is NOT taxed. This can help you increase your retirement income while keeping your taxes under control. This strategy can be especially helpful if you’re living in a state with high income taxes.

Looking Beyond Taxes

Focusing on taxes is a good way to narrow down your list of retirement destinations. However, taxes won’t be the only thing that impacts your quality of life in retirement. Before you pack up all your belongings and move to another state, here are some other things to consider:

• Is the area affordable? In addition to taxes, you also have to think about things like housing, groceries, and entertainment, and all of that is more expensive in some areas than in others. According to U.S. News, Decatur, Illinois, is the cheapest place to live with a median monthly rent of $570 and a median home value of $89,855.
• Does the area offer reliable public transportation? You may be fine behind the wheel now, but what about 10, 20 or 30 years from now? If you’re planning to stay in the area for the rest of your retirement, it makes sense to consider your public transportation options. Metro says Boston, Massachusetts has the best public transportation system in the U.S. Other places with strong public transit include Seattle, Washington, and Washington, D.C.
• Can you get the healthcare you need? As you age, there’s a good chance you’ll develop more health complications that require regular care. According to Healthcare Insider, the best city for healthcare cost, access and quality is Boston, followed by Minneapolis-St. Paul, Philadelphia, Baltimore, and Seattle.
• Is there a thriving senior community? Retirement can be lonely, but it doesn’t have to be. Once you quit working, you lose the companionship of your coworkers, and to avoid becoming socially isolated, you’ll want to make new friends. Younger adults may be too busy during the workweek, so it makes sense to look for friends your own age. According to Axios, the senior population is growing in Philadelphia, Miami, and Northwest Arkansas. If you move to any of these areas, you’re likely to find other retirees who are looking to make new friends.
• Do you like the area? This comes down to personal preference, but it can be just as important as things like cost of living and tax policies. You want to enjoy your retirement, and your environment will have a major impact on this. Think about things like the weather, the culture and the forms of entertainment. If you’re not sure whether you’ll like a place, consider taking a long vacation there before you decide to move. Try to stay away from the tourist traps and get a good feeling for what life is like for the locals.
• Do you have family or friends there? This is another personal factor to consider. Moving close to family and friends means you’ll have access to companionship and support during emergencies. It also means you’ll be able to provide support. For example, now that you’re retired, you may want to offer to babysit your grandkids sometimes as a way to bond with them. Keep in mind, though, that if you move to be with family, there’s no guarantee that they won’t move somewhere else later.

Navigating Your Ideal Retirement

As you go through your checklist, you may note that some factors conflict with others. For example, Boston may be great in terms of public transportation and healthcare, but it’s hardly the cheapest place to live. Likewise, many of the most affordable places tend to have poor public transit.

No one can tell you which factors matter most, so you’ll need to establish your own priorities. Think about what really matters to you. For example, are you most worried about accessing healthcare and entertainment, or are you more concerned about being close to family?

Also consider how you can offset certain concerns. For example, if you’re worried about affordability and high tax rates, moving to a less expensive location isn’t the only way to protect your budget. An annuity could ease your financial concerns by providing guaranteed retirement income with tax advantages. If you’re not as worried about taxes and running out of retirement money, you’ll have more freedom to live in a state that matches you other criteria.

An increasing number of seniors are turning to annuities as a way to secure retirement income that they can’t outlive. Some annuities, like the Forever Fund, provide guaranteed payments in a simple plan with no commissions, account charges or fees. The Forever Fund offers a variety of payout options designed to meet different retirement goals. Whether you're looking for lifetime income, guaranteed payments for a set period, protection for your beneficiaries, or payments that grow over time, there’s an option to fit your needs. Learn more.

Need a tool to help you plan your ideal retirement? Download The Canvas Retirement Planning Guide in our Learning Library.