2024 Best States to Retire in for Tax Purposes

By Laurel Tincher · October 09, 2023 · 8 minute read

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2024 Best States to Retire in for Tax Purposes

Many people consider relocating when they retire to reduce their cost of living and make their savings last longer. When weighing the pros and cons of moving to another state, it’s important to consider the total tax burden there, including state and local taxes on retirement income, property tax, even sales tax. Some areas with a lower tax burden have a higher overall cost of living, which can cancel out any savings.

Below we look at the best states to retire in for taxes and how to tell if moving will be worth it.

Key Points

•   Writing a check to yourself is a way to transfer money between your own accounts.

•   Start by writing your name as the payee and the amount you want to transfer.

•   Sign the check on the signature line as the payer and write “For Deposit Only” on the back.

•   Deposit the check into your other account through a mobile banking app or at a bank branch.

•   Keep a record of the transaction for your own records and to reconcile your accounts.

Most Tax-Friendly States for Retirement

A number of states exempt Social Security income from state taxes. A smaller number offer a tax break on other retirement income, such as IRAs and 401(k) plans, private pensions, interest, dividends, and capital gains.

These are the 10 tax-friendly states for retirees, according to Kiplinger:

1.    Mississippi

2.    Tennessee

3.    Wyoming

4.    Nevada

5.    Florida

6.    South Dakota

7.    Iowa

8.    Pennsylvania

9.    Alaska

10.    Texas

But before you complete that change of address card, you’ll want to look at the bigger picture.

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Factors to Consider When Choosing the Best State to Retire In

When choosing where to retire, it’s wise to first consider issues like safety, access to healthcare, distance to friends and family, or living near other people of retirement age.

Make a list of features that are important to you in a retirement locale, and consider whether any of them could indirectly impact your cost of living, such as being close to friends and family.

Then look at the total cost of living in an area: housing, food, transportation, cultural activities, and other expenses. These retirement expenses generally have a bigger impact on one’s lifestyle than taxes.

Finally, to determine whether a state is tax-friendly for retirees, look at the following:

Does the State Tax Social Security?

Generally, Social Security income is subject to federal tax. But some states also tax Social Security above a certain income threshold, while other states offer tax exemptions for individuals in lower tax brackets.

The states that tax some or all Social Security benefits are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

Does the State Tax Pensions?

Many states tax income from pensions, but 14 states do not. These states are: Alabama, Alaska, Florida, Hawaii, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.

And these 13 states do not tax income from 401(k) plans: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax.

Recommended: Tax-Friendly States That Don’t Tax Pensions or Social Security Income

Other Taxes That Affect Retirees

When choosing the best state for you to retire in, it’s a good idea to look into sales tax and property taxes too. States that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. On the other hand, New Hampshire has very high property taxes, reducing the benefit of no sales tax.

Recommended: When to Start Saving for Retirement

States to Avoid When Retiring

Choosing the best state to retire in sometimes means making compromises. If safety and healthcare access are top priorities, for instance, you may not get your ideal weather. But for many retirees, a high cost of living is a deal-breaker.

Here are the 10 states with the highest annual cost of living, according to a 2023 analysis conducted by GOBankingRates:

1.    Hawaii: $124,486

2.    Massachusetts: $100,325

3.    California: $92,829

4.    New York: $90,821

5.    Alaska: $83,995

6.    Maryland: $83,058

7.    Oregon: $81,786

8.    Vermont: $77,904

9.    Connecticut: $77,235

10.    New Hampshire: $76,766

Recommended: Avoid These 12 Retirement Mistakes

The Best States to Retire in 2024

As noted above, the best state to retire in will depend on an individual or couple’s budget, lifestyle, and values. But recent trends may help point you in the right direction.

These are the top 10 states that retirees are moving to, according to United Van Lines’ annual National Movers Study:

1.    Wyoming

2.    Delaware

3.    South Carolina

4.    Florida

5.    Maine

6.    Arizona

7.    New Mexico

8.    South Dakota

9.    West Virginia

10.    Alabama

If cost of living is your sole concern, the following are the 10 least expensive states, according to Bankrate:

1.    West Virginia

2.    Mississippi

3.    Iowa

4.    Alabama

5.    Missouri

6.    Oklahoma

7.    Indiana

8.    Kansas

9.    Wyoming

10.    Arkansas

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States with the Lowest Tax Burden

An area’s total tax burden is the sum of all property taxes, sales taxes, excise taxes (which affect the price of goods), and individual income taxes. Below are the states with the lowest total tax burden for retirees.



Total Tax Burden

1 Alaska 5.06%
2 Delaware 6.12%
3 New Hampshire 6.14%
4 Tennessee 6.22%
5 Florida 6.33%
6 Wyoming 6.42%
7 South Dakota 6.69%
8 Montana 6.93%
9 Missouri 7.11%
10 Oklahoma 7.12%

States With the Most Millionaires

One way to measure the overall desirability of an area is the number of millionaires who live there. After all, millionaires can afford to live in states that have high-quality healthcare, nice weather, and diverse cultural offerings. These are not the cheapest states in terms of cost of living or taxes, but their popularity may help non-millionaires reevaluate their must-haves vs. nice-to-haves.



% of Millionaire Households

1 New Jersey 9.76%
2 Maryland 9.72%
3 Connecticut 9.44%
4 Massachusetts 9.38%
5 Hawaii 9.20%
6 District of Columbia 9.12%
7 California 8.51%
8 New Hampshire 8.47%
9 Virginia 8.31%
10 Washington 8.18%
Source: Statista

Does It Make Financial Sense to Relocate in Retirement?

For workers who already live in a state with moderate taxes, near family, and have a lifestyle they enjoy and can afford, there may not be any compelling reason to move. But for those looking to make a change or lower their retirement expenses, it may make financial sense to relocate.

Just remember that housing, food, transportation, and other expenses usually have a bigger impact on one’s retirement lifestyle than taxes.

Pros and Cons of Relocating for Tax Benefits

Lower taxes alone may not be enough to motivate someone to pick up and move house. Other factors should also support the decision.

Pros of Relocating for Tax Benefits

•   Potentially lower cost of living

•   Discovering a community of like-minded retirees

•   Possibly ticking off other boxes on your list

Cons of Relocating for Tax Benefits

•   Other living costs may cancel out the tax benefits

•   Moving costs are high, and the stress can be tough

•   Need to find another home in a seller’s market

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The Takeaway

The best state to retire in for tax purposes depends on an individual’s budget, lifestyle, and values. Some states with lower taxes for retirees can have higher housing and transportation costs, canceling out any tax benefit. A financial advisor can help you decide if saving on taxes is worth the expense and trouble of relocating.

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What are the 3 states that don’t tax retirement income?

Nine states don’t tax retirement plan income because they have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Illinois, Iowa, Mississippi and Pennsylvania don’t tax distributions from 401(k) plans, IRAs, or pensions. Alabama and Hawaii don’t tax pensions, but do tax distributions from 401(k) plans and IRAs.

Which state is the best state to live in for tax purposes?

Alaska has the lowest overall tax rates.

Which states do not tax your 401k when you retire?

Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax 401(k) plans when you retire.

Photo credit: iStock/Jeremy Poland

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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