11 Best States to Retire, Classified by Cost of Living

When we reach retirement age, many of us plan to enter the dream state we have always been in as we grow older. Some of us move to benefit from a lower cost of living, better health care and more favorable tax laws, and others move to enjoy a better climate and a better family.


We have ranked 50 states from highest to lowest cost of living, with data on tax breaks, annual income, and health care expenses. These data come from Kiplinger, the Milken Institute, the National Association of Realtors, the Bureau of Labor Statistics, and other sources.

Remember that it is important to consult various sources when considering retirement. Take our list with a grain of salt, as it is written for entertainment purposes only.

1. Arkansas

Cost of living: 17 percent below U.S. average

Population: 3.0 million

Best city: Bella Vista

PRO: The cost of living in the natural state is quite low, and the average cost of health is the third lowest for retired couples. Arkansas is known for its hot springs,  wildlife, mountains and rivers – hence the name “Natural State”.

CON :Arkansas state taxes are not that easy to pay. Social security benefits and up to $6,000 in other pension income are exempt. The maximum income tax rate can be as high as 6.9% if income exceeds $75,000. The poverty rate for older people in Arkansas is the eighth highest in the United States. Also, this southern state is not the right place for people who want to live in a big city!

2. West Virginia

Cost of living: 17 percent below U.S. average

Population: 1.806 million (as of 2018, says U.S. Census Bureau)

Best city: Lewisburg, says Niche.com

PRO:The cost of living is not too bad, it is 17% lower than the US average. According to USA Today, the state is known for its picturesque views, rich history, great resorts and much more.

CON: According to George Mason University’s Mercatus Center, the Mountain State is not tax-effective for retirees and is ranked low for fiscal strength. It also has poor health care for people over 65.

3. Oklahoma

Cost of living: 16% below the US average

Population: 3.9 million

Best City: Nichols Hills

PRO: The low cost of living benefits especially those with high pension assets. Oklahoma is also one of the states that does not collect social security taxes, and up to $10,000 can be excluded from retirement income. This is in recognition of the fact that the median income is low.

CON: Oklahoma ranks third in terms of the health of the elderly. Not only is there a high level of physical inactivity and smoking, but there is also a lack of geriatric care and good nursing homes that can cure all health problems.

4. Indiana

Cost of living: 15% below the US average

Population: 6.6 million

Best City: Meridian Hills

PRO : The cost of living in Indiana is 15% lower than the national average, which means that daily expenses such as food, housing, gas, etc. are much more affordable. These things would impact your wallet in places like California and Hawaii.

CON: The state of Indiana is best suited for older people with large savings because their annual income is lower than the US average. (21.4% less, to be exact), and pension income, excluding social security, is taxed at standard rates.

5. Mississippi

Cost of living: 15 below the U.S. average

Population: 3.0 million

Best city: Hidden Lake

PRO: Seniors can appreciate the tax cuts and low cost of everyday items in Mississippi. All of your retirement benefits, IRA and 401K distributions and other retirement income is tax-free. In addition, these real estate taxes are the lowest in the country.

CON: While Mississippi’s taxes and cost of living are easy to bear, according to the United Health Foundation, the state is last in line for seniors’ health. At 13.4 percent, it also has the highest poverty rate for seniors in the country.

6. Kentucky

Cost of living: 14% below average

Population: 4.4 million

The best city: Lexington

PRO: Welcome to the state of Bluegrass, where retirees can enjoy a low cost of living and various tax benefits. Social security and $41,110 of other income is tax free. However, it is not the healthiest place for seniors .

CON: Health care costs for the elderly are not lower than in other states – this is the average in the United States. It is also in a very poor position when it comes to seniors’ health, with high rates of smoking, lack of exercise and poverty. There are also a small number of good nursing homes for the elderly.

7. Kansas

Cost of living: 14% below average

Population: 2.9 million

Best city: Eureka

PRO : The cost of living is quite low in the Sunflower State, which might convince you that there is no place like home in Kansas (you know, alluding to the Wizard of Oz?). Its picturesque plains and prairies are also attractive to nature lovers.

CON:Kansas isn’t in the best financial position, so it’s raising taxes to balance its budget deficit. Most pension income, including social security, will be subject to state taxes at rates between 3.1 and 5.7 percent. This may not be the best place to be if you are very budget conscious.

8. Alabama

Cost of living: 13% lower than the U.S. average

Population: 4.8 million

The best city: Orange Beach

PRO: Go to the heart of Dixie where the budget is low. Most spend 4.4% less than the average retiree on health care, income taxes are 2-5% and social security benefits are exempt.

CON:Storms can be intense in the spring and November, with lots of rain and thunderstorms. Like most southern states, Alabama will be hot, hot, hot during the summer. When choosing a place to live, consider that southern Alabama is warmer than northern Alabama.

9. Iowa

Cost of living: 12% lower than the US average

Population: 3.1 million

The best city: Iowa City

PRO: Hooray! No social security income tax and a reduction in income tax on state pensions! The city of Iowa has been named “City of Literature” by UNESCO and is home to a vibrant cultural scene and a famous university.

CON:Iowa’s senior citizens’ wallets are not spared taxes, even though social security benefits are not taxed. Retirement income can be affected by up to 8.98%. However, people over 55 can exclude up to $6,000 of taxable retirement income.

10. Michigan

Cost of living: 12% below the US average

Population: 9.9 million

The best city: Farmington

Michigan’s low cost of living and low poverty rate make it very attractive to pensioners. Also, social security is not imposed here in the Great Lakes State. For water sports enthusiasts, the Great Lakes are a favorite destination during Michigan’s spring and summer months.

In a few years, Michigan’s fiscal situation will become more complicated. In 2020, people over 67 will have to choose between deducting their income from social security or $20,000 from all sources of income for singles and $40,000 for couples.

11. Ohio

Cost of living: 12% lower than the US average

The population: 11.6 million

Best city: Bellbrook

PRO: Geographically, Ohio’s central location makes it easy to get to the coast to visit family and friends or take a vacation. The cost of living is quite low, 12% below the national average, and social security is not taxed.

CON: The low cost of living and exemption from social security is attractive, but the average family income of older people is not as high. Ohio can work for you if you have a lot of savings, otherwise you have an average income of $42,667.

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