Retirement / Planning
6 min Read
By Jordan Rosenfeld
Many Americans spend the better part of their lives preparing for retirement. Even if it’s just routing a portion of every paycheck into a 401(k) or individual retirement account, you’re likely to spend almost all of your adulthood slowly building your nest egg so you can enjoy a comfortable retirement. However, with all of the focus on how fast you can put money into your savings, it’s possible that you’re overlooking the other side of the equation: how fast you’ll be taking that money back out.
Find Out: The Cost To Own a 3-Bedroom Home in Every State
That storied $1 million in retirement savings might finally be yours, but what if you live in an area where property taxes and Social Security income taxes force you to rely more heavily on your nest egg? Likewise, even if you started saving later in life, you can effectively boost the purchasing power of your limited funds by opting to live in a state with a cheap cost of living and lower taxes.
Where you live in your golden years can be an essential part of your retirement planning. Once you’re on a fixed income, you’ll need to maximize your dollars. GOBankingRates found the worst states for retirees to hang on to their savings by ranking four main factors affecting retirees: taxes, living expenses, healthcare, and Social Security. Note that the metric used for cost of living is an index where 100 is the U.S. average, sourced from the Missouri Economic Research and Information Center.
The following is a list of the 15 states to avoid when you’re considering where to spend your retirement, with the No. 1 state being the most expensive for retirees. Even if your decision is influenced by your family’s location or personal preferences, it’s worth understanding how these different costs can add up so that you’re able to budget accordingly.
If you’re flexible in terms of where you’re willing to live, you might even be able to save enough money to retire early and quit the daily grind.
Last updated: Feb. 26, 2021
15. Rhode Island
- State sales tax: 7%
- State tax on social security: Yes
- Median property tax rate: 1.53%
- Estimated property tax: $5,245
- Median home value: $342,811
- Cost-of-living index: 119.6
- Average annual healthcare spending: $7,345
- Average social security benefits: $1,647.47
14. California
- State sales tax: 8.68%
- State tax on social security: No
- Median property tax rate: 0.74%
- Estimated property tax: $4,651
- Median home value: $628,535
- Cost-of-living index: 138.7
- Average annual healthcare spending: $7,708
- Average social security benefits: $1,540.35
13. Vermont
- State sales tax: 6.24%
- State tax on social security: Yes
- Median property tax rate: 1.80%
- Estimated property tax: $5,035
- Median home value: $279,737
- Cost-of-living index: 116.8
- Average annual healthcare spending: $6,799
- Average social security benefits: $1,623.09
Are You Retirement Ready?
12. North Dakota
- State sales tax: 6.96%
- State tax on social security: Yes
- Median property tax rate: 0.95%
- Estimated property tax: $2.312
- Median home value: $243,322
- Cost-of-living index: 97
- Average annual healthcare spending: $7,803
- Average social security benefits: $1,563.04
11. New Mexico
- State sales tax: 7.83%
- State tax on social security: Yes
- Median property tax rate: 0.68%
- Estimated property tax: $1,552
- Median home value: $228,172
- Cost-of-living index: 89.8
- Average annual healthcare spending: $6,676
- Average social security benefits: $1,482.79
10. Missouri
- State sales tax: 8.25%
- State tax on social security: Yes
- Median property tax rate: 1.01%
- Estimated property tax: $1,814
- Median home value: $179,561
- Cost-of-living index: 89.4
- Average annual healthcare spending: $6,662
- Average social security benefits: $1,519.25
9. Nebraska
- State sales tax: 6.94%
- State tax on social security: Yes
- Median property tax rate: 1.65%
- Estimated property tax: $3,151
- Median home value: $190,9821
- Cost-of-living index: 93.1
- Average annual healthcare spending: $6,819
- Average social security benefits: $1,601.87
8. Hawaii
- State sales tax: 4.44%
- State tax on social security: No
- Median property tax rate: 0.30%
- Estimated property tax: $2,393
- Median home value: $764,492
- Cost-of-living index: 199.1
- Average annual healthcare spending: $7,872
- Average social security benefits: $1,600.43
7. Connecticut
- State sales tax: 6.35%
- State tax on social security: Yes
- Median property tax rate: 1.7%
- Estimated property tax: $5,151
- Median home value: $303,010
- Cost-of-living index: 124.1
- Average annual healthcare spending: $7,598
- Average social security benefits: $1,763.33
6. Maine
- State sales tax: 5.50%
- State tax on social security: No
- Median property tax rate: 1.27%
- Estimated property tax: $3,446
- Median home value: $271,326
- Cost-of-living index: 116.8
- Average annual healthcare spending: $7,810
- Average social security benefits: $1490.19
5. Alaska
- State sales tax: 1.76%
- State tax on social security: No
- Median property tax rate: 1.02%
- Estimated property tax: $3,191
- Median home value: $312,877
- Cost-of-living index: 127.8
- Average annual healthcare spending: $10,366
- Average social security benefits: $1,530.44
Are You Retirement Ready?
4. Colorado
- State sales tax: 7.72%
- State tax on social security: Yes
- Median property tax rate: 0.56%
- Estimated property tax: $2,506
- Median home value: $447,460
- Cost-of-living index: 104.1
- Average annual healthcare spending: $6,847
- Average social security benefits: $1,633.23
3. Massachusetts
- State sales tax: 6.25%
- State tax on social security: No
- Median property tax rate: 1.15%
- Estimated property tax: $5,531
- Median home value: $480,977
- Cost-of-living index: 130.1
- Average annual healthcare spending: $8,651
- Average social security benefits: $1,678.02
2. Illinois
- State sales tax: 8.82%
- State tax on social security: No
- Median property tax rate: 2.05%
- Estimated property tax: $4,510
- Median home value: $220,012
- Cost-of-living index: 95.7
- Average annual healthcare spending: $6,819
- Average social security benefits: $1,590.36
1. Texas
- State sales tax: 8.19%
- State tax on social security: No
- Median property tax rate: 1.69%
- Estimated property tax: $3,770
- Median home value: $223,085
- Cost-of-living index: 92.6
- Average annual healthcare spending: $6,532
- Average social security benefits: $1,515.58
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Joel Anderson contributed to the reporting for this article.
Methodology: GOBankingRates ranked all 50 states on four main factors affecting retirees: taxes, living expenses, healthcare, and Social Security. These four factors were broken down into sets of data points.
In the taxes category, we examined: (1) average state and local sales tax rates, sourced from The Tax Foundation; (2) median property tax rates, sourced from The Tax Foundation; (3) estimated annual property tax based on the median home value, sourced from Zillow December 2020 data; and (4) state taxes on Social Security benefits, sourced from AIG retirement services.
In the living expenses category, we examined: (5) the median home value for single-family residences as of 12/2020, sourced from Zillow; and (6) each state’s cost of living index value, where the U.S. average is 100, sourced from the Missouri Economic Research and Information Center (MERIC).
To capture (7) healthcare costs in each state, we multiplied the Consumer Expenditure Survey’s estimate of total annual spending on healthcare by people 65 and up by each state’s healthcare cost index according to MERIC.
To capture the impact of Social Security, we ranked states on (8) their average monthly benefit payment for retirees.
For all the factors above except the average Social Security payment, smaller values (lower taxes, lower living expenses, lower healthcare costs) were scored as more desirable. For Social Security, higher payments were scored as more desirable. Our final ranking was determined by each state’s cumulative score on all of the above factors, with #1 being the overall best state to retire rich and #50 being worst. Factors 4 and 8 were weighted double to create each state’s final score.
All research was conducted on and up-to-date as of February 2, 2021.
