Experts suggest that you start planning for retirement as early as possible, ideally right when you start working. However, on top of investing in your retirement accounts, you might also want to think about where you want to settle down. If you can’t decide where you want to be, you might as well start by ruling out some places to avoid.
One of the states to avoid when retiring is Alaska because of its high cost of living, subpar healthcare services, and high crime rate. Other states you might want to cross out when planning a retirement move include Oregon, New Mexico, Minnesota, Illinois, New York, and California.
These states, along with others, land at the bottom of the rankings when considering a variety of factors. However, you’ll want to have a better idea of what each state offers so you can decide if the judgments align with your preferences. Read on to learn more about what to consider during retirement and see the list of states you might want to avoid.
What To Consider When Deciding Where To Retire
When choosing which state you plan to retire in, you’re likely going to want to consider several main factors.
Cost of Living
Unless you plan to retire with an unlimited amount of disposable income, money will probably be a pretty important factor in your decision.
Experts say that you should plan to spend 55-80% of your annual income each year in retirement, which means you’ll want to avoid moving to a state with a significantly higher cost of living than your own without doing extensive research beforehand.
For this ranking, we based each state’s cost of living off of MIT’s Living Wage Calculator, which calculates the hourly wage that an individual needs to make to cover their basic needs self-sufficiently.
As opposed to bare-minimum benchmarks like the poverty line, the living wage takes into account all basic needs, including food, health insurance, housing, transportation, and other basic necessities. It’s also stated as a pre-tax wage requirement.
State income taxes can vary widely across the country. Some tax retirement income while others will give seniors special credits and deductions. Therefore, it’s a good idea to know what you’re getting into ahead of time. We compiled this list’s tax information from Kiplinger’s State-by-State Guide to Taxes on Retirees.
Another big factor in your decision of where to retire may be the climate. While many retirees prefer sunny, warm climates year-round, others may want to experience four seasons. Either way, it’s usually best to avoid areas with extreme temperatures and frequent natural disasters.
Even if you don’t care much about the culture of where you live, you’ll probably at least want to feel safe. If you plan to be pretty active during retirement, it’s a good idea to opt for a state with a low crime rate, which typically goes hand-in-hand with a low poverty rate as well.
For this ranking, we looked at a list of the most dangerous states in America by the media company 24/7 Wall Street. Using data from the FBI’s 2018 Uniform Crime Reporting Program, a 24/7 Wall Street staff compiled a ranking of states based on their violent crime rates, numbers of murders, and imprisonment rates.
You’ll want to be prepared for any unexpected health conditions or emergencies when you reach retirement age. Experts say that you should expect to spend 15% of your living expenses to come from healthcare-related costs, so it’s important to find a place with good quality healthcare at an affordable price.
To create this list, we looked at WalletHub’s state healthcare ranking. With data from the US Census Bureau, a writer at WalletHub took into account the average cost, accessibility, and outcomes for healthcare services in each state and compiled their final findings into a ranked list of all 50 states, plus the District of Columbia.
Alaska’s beautiful views and remote lifestyle may put it at the top of some future retirees’ lists. However, its cost of living can be more than many are prepared for. Since many basic goods need to be shipped over from the mainland, they’re often more expensive than elsewhere in the United States.
On top of that, its violent crime rate is the highest in the country, with 885 violent crimes per 100,000 in 2018. Its healthcare also ranks low on WalletHub’s list at 42nd place, primarily because it’s extremely expensive and relatively difficult to access.
On the bright side, Alaska’s tax situation is pretty positive. It’s one of the few states with no state income or sales tax. However, since localities can impose sales taxes up to 7.5%, the state-wide average falls at 1.76%.
While there’s a median property tax of around 1.18%, homeowners aged 65 and older are exempt from paying taxes on the first $150,000 of their property.
- MIT’s living wage calculation: $15.85 per hour
- Percent of the population 65+: 11.8%
- WalletHub healthcare ranking: 42nd
- Violent crime rate: 885 per 100,000 people
With its laid-back culture and stretches of nature, Oregon may seem like a great place to settle down, and with residents aged 65 and over making up 17.6% of the population, it seems that many retirees think so, too.
However, before you start looking at houses in the Pacific Northwest, you’ll want to make sure you can afford the high cost of living on top of the income taxes.
Its healthcare program is pretty average for the US, ranking 32nd on WalletHub’s list. However, healthcare services in Oregon cost way more than in the average state, at 49th place. On the other hand, outcomes are pretty positive at 14th place. The state also benefits from a fairly low violent crime rate, at 285.5 per 100,000 in 2018.
While Oregon, fortunately, has no sales taxes, the income tax ranges from 4.75%-9.9%. However, taxpayers aged 62 and over may qualify for some deductions and tax credits, depending on their situation.
- MIT’s living wage calculation: $17.02 per hour
- Percent of the population 65+: 17.6%
- WalletHub healthcare ranking: 32nd
- Violent crime rate: 285.5 per 100,000 people
With a relatively low cost of living as well as senior residents making up 17.5% of the population, New Mexico doesn’t seem like a bad place for retirees. However, its high crime and poverty rate make it a little bit less appealing.
In 2018, there were 856.6 violent crimes per 100,000. On top of that, 15% of people aged 65 and over live in poverty, which paints a very different picture than many people’s idea of an idyllic retirement setting.
While healthcare in New Mexico isn’t the worst in the country, it does fall slightly below average, at 29th place in WalletHub’s ranking. While healthcare services’ cost is pretty decent, poor access and outcomes drag down the state’s ranking.
While living in New Mexico is relatively affordable, the state taxes can take a bite out of your spending money. Income tax ranges from 1.7%-5.9%, and social security benefits are taxed the same as at the federal level. However, taxpayers aged 65 and over can exclude up to $8,000 of their income from taxes.
The state sales tax is 5.125%, but since localities can add as much as 4.313%, the average combined rate is 7.83%. However, groceries and prescription drugs are exempt.
- MIT’s living wage calculation: $14.47 per hour
- Percent of the population 65+: 17.5%
- WalletHub healthcare ranking: 29th
- Violent crime rate: 856.6 per 100,000 people
You might’ve already been trying to steer clear of Minnesota because of the heavy snow and chilly winters, but the state’s high taxes are the icing on the cake.
State income tax ranges from a hefty 5.35%-9.85%, and Social Security benefits are taxable, as well. Fortunately, taxpayers aged 65 and over may qualify for a deduction, depending on their situation.
State sales tax is also quite high at 6.875%, and since localities can add as much as 2%, the average tax rate ends up at 7.46%. Groceries, clothing, and prescription drugs are exempt from the tax.
On the other hand, healthcare in Minnesota is stellar, ranking 2nd on WalletHub’s list with high rankings across the board. Crime also isn’t too bad across the state, with the 5th lowest imprisonment rate in 2018 at 249 per 100,000.
Retirees in Minnesota also have a decent chance of making some new friends, as residents aged 65 and over make up 15.9% of the state’s population.
- MIT’s living wage calculation: $15.11 per hour
- Percent of the population 65+: 15.9%
- WalletHub healthcare ranking: 2nd
- Violent crime rate: 220.4 per 100,000 people
While the Prairie State may sound like a peaceful place to retire, you’ll need to watch out for rough weather and high property taxes if you’re planning to move there. While having four seasons may be nice for some, the winters can get pretty icy while the summers are hot and humid. Therefore, you might want to prepare to be stuck inside for eight months out of the year.
Illinois has a flat income tax rate of 4.95%, but Social Security benefits are exempt, as is income from most retirement plans. The state sales tax is 6.25%, but since localities can add as much as 4.75%, the average combined rate is 8.82%. Groceries and prescription drugs are only taxed 1% by the state.
Many Illinois residents complain about the high property taxes, which average about 2.17% across the state but are much higher in some areas. Homeowners aged 65 and over may also be eligible for property tax deductions depending on their situation.
Healthcare in Illinois is pretty average compared to other states, at 25th place on WalletHub’s list. While costs are slightly lower and accessibility is a little bit above average, outcomes are slightly less favorable compared to other states.
- MIT’s living wage calculation: $15.86 per hour
- Percent of the population 65+: 15.6%
- WalletHub healthcare ranking: 25th
- Violent crime rate: 404.1 per 100,000 people
With the Big Apple’s reputation of the hustle and bustle, many future retirees may have already crossed New York off of their list. However, even if the excitement of the city sounds appealing to you, the high cost of living and expensive senior care options may not.
Senior living options in New York are among the priciest in the country, with an average price tag of $5,920 per month for assisted living and $10,900 for nursing homes. While this cost may decrease as you move outside the city, healthcare options become more limited as you move into the rural areas.
Income tax in New York ranges from 4%-8.82%, but New York City and Yonkers impose their own tax on top of that. Fortunately, Social Security benefits are exempt, as is an income from federal, state, or local government retirement plans.
Taxpayers aged 59 ½ and over can also exclude up to $20,000 of federally-taxed income from private retirement plans or government plans from another state.
New York imposes a 4% sales tax, but localities can add up to 4.875%, so the average combined rate is 8.52%. However, groceries and prescription drugs are exempt, as are clothing purchases under $110. Property taxes are relatively high, averaging about 1.69%, but homeowners aged 65 and over may qualify for exemptions.
- MIT’s living wage calculation: $18.62 per hour
- Percent of the population 65+: 16.4%
- WalletHub healthcare ranking: 28th
- Violent crime rate: 350.5 per 100,000 people
California’s sunny climate and year-round warmth may make for an ideal retirement spot. However, living in the Golden State comes with its fair share of drawbacks, including the high cost of living and natural disasters.
California tops many lists of the most expensive places to live, with notoriously pricey cities like San Francisco and Los Angeles. You can find the average two-bedroom at around $2,495 per month, and even more if you want to live in a city.
On top of that, the high price tag for healthcare services adds to the cost of living. Healthcare costs rank 42nd on WalletHub’s list and combine with below-average access and outcomes to put California’s healthcare at 34th place.
Despite its relatively low imprisonment rate, California can also be a pretty dangerous place to live for retirees. Natural disasters can be more than an inconvenience for homeowners, as earthquakes and wildfires can destroy communities and create hazardous situations for residents who are out of their physical prime.
State income taxes in California range from 1%-13.3%, but the state doesn’t tax Social Security. There’s also a state sales tax of 7.25%, but since localities can add up to 2.5%, the average combined rate ends up being 8.68%.
However, groceries and prescription drugs are exempt. There’s also a property tax of 0.73% on average, but homeowners aged 62 and over may qualify to defer their payments.
- MIT’s living wage calculation: $18.57 per hour
- Percent of the population 65+: 14.3%
- WalletHub healthcare ranking: 34th
- Violent crime rate: 447.4 per 100,000 people
Situated right on the coast of the Atlantic Ocean, Rhode Island may be a consideration for those who hope to retire in a beach house. However, with its high cost of living and cold winters, it may be better suited for a vacation home than a permanent residence.
Even though seniors make up 17.2% of the state’s population, senior care options are relatively pricey. The average cost falls at around $5,325 per month for assisted living and $7,650 for nursing homes.
You may face a handful of taxes as a retiree in Rhode Island, as well. Income tax ranges from 3.75%-5.99%, and Social Security benefits are taxed for those above a certain income bracket. However, taxpayers at the full retirement age can exclude up to $15,000 of income from private, government, and military retirement plans.
The state imposes a 7% sales tax, which localities can’t add to. Groceries and prescription drugs are exempt from the tax, along with clothing purchases under $250. Property tax is also relatively high at 1.53% on average, but homeowners aged 65 and over may qualify for a state income tax credit for property tax relief, depending on their situation.
On the bright side, healthcare in Rhode Island ranks 3rd on WalletHub’s list due to its low costs, easy access, and positive outcomes. It’s also a relatively safe place to live, with a violent crime rate among the lowest in the country, at 212 per 100,000 in 2018.
- MIT’s living wage calculation: $15.78 per hour
- Percent of the population 65+: 17.2%
- WalletHub healthcare ranking: 3rd
- Violent crime rate: 212 per 100,000 people
As one of the oldest states, Maryland probably draws in many retirees with its rich historic culture and pleasant East Coast climate. However, it falls to the bottom of many retirement destination lists because of its high cost of living.
Luckily, the tax situation for retirees isn’t too bad compared to other states. While income tax ranges from 2%-5.75%, plus additional taxes in Maryland counties and Baltimore city, Social Security benefits are excluded.
Taxpayers aged 65 and over can also exclude up to $33,100 of federally taxed income from an employee retirement plan. Additionally, taxpayers aged 55 and over can exempt up to $15,000 of income from a military retirement plan.
There’s also a 6% sales tax, but localities can’t impose any additional taxes, and groceries and prescription drugs are exempt.
Healthcare programs are ranked a little bit above average, at 16th place on WalletHub’s list, mostly due to the low costs. However, services seem to be a little bit difficult to access, and the outcomes are considered to be average.
- MIT’s living wage calculation: $17.73 per hour
- Percent of the population 65+: 15.4%
- WalletHub healthcare ranking: 16th
- Violent crime rate: 468.7 per 100,000 people
Arizona’s infamously hot and dry climate may appeal to those who’d like to avoid the cold in their retirement days. In fact, with seniors making up 17.5% of the state’s population, many retirees are likely enjoying the warmth.
However, Arizona’s poor healthcare options may change your mind. Healthcare in Arizona ranks 41st on WalletHub’s list, with relatively high costs, lower-than-average outcomes, and poor accessibility.
The state also imposes income taxes ranging from 2.59%-4.5%, along with a 3.5% surtax on taxable income over $250,000 for individuals because of Proposition 208.
Fortunately, Social Security benefits aren’t taxed by the state, and $2,500 of income from federal, state, and local government retirement plans is exempt from income taxes, along with up to $3,500 of military income.
There’s also a 5.6% state-wide sales tax, and since localities can add as much as 5.6%, the average combined tax is 8.4%. However, groceries are exempt from state tax, and prescription drugs are fully exempt.
- MIT’s living wage calculation: $15.28 per hour
- Percent of the population 65+: 17.5%
- WalletHub healthcare ranking: 41st
- Violent crime rate: 474.9 per 100,000 people
Unlike many other states on this list, Kentucky is actually a pretty affordable place to settle down, with a low cost of living and low taxes for retirees. However, its poor senior care options and high poverty rate make it a less desirable choice.
The US Centers for Medicare and Medicaid Services deemed 43% of Kentucky’s 284 nursing homes “below average” or “much below average” in 2019. Many nursing home residents in the Bluegrass State have shared horror stories about the neglect they’ve undergone because of mismanagement and short-staffing.
The poverty rate in Kentucky is one of the highest in the country, at 16.9% in 2018. As in many cases, this is pretty correlated to the state’s overall crime. That same year, the imprisonment rate was 682 per 100,000, the 8th highest in the country.
Kentucky has a flat income tax rate of 5%, but certain local governments can levy additional payroll taxes. However, Social Security benefits aren’t taxed by the state, and up to $31,110 of income from private, government, and military retirement plans is exempt. There’s also a 6% levy on sales tax, with no additional local taxes. Groceries and prescription drugs are exempt.
- MIT’s living wage calculation: $13.99 per hour
- Percent of the population 65+: 16.4%
- WalletHub healthcare ranking: 27th
- Violent crime rate: 211.9 per 100,000 people
While Montana may promise a nature-filled and affordable lifestyle, it could also cost you a hefty portion of your retirement savings in taxes. Its income taxes range from 1%-6.9%, and Social Security benefits are taxable. However, some taxpayers may qualify to exclude up to $4,370 of income from a retirement plan.
There’s no state sales tax, but resort areas may have local sales taxes. Property taxes average around 0.83%, but homeowners or renters aged 62 and over may qualify for a refundable income tax credit, depending on their situation.
- MIT’s living wage calculation: $14.22 per hour
- Percent of the population 65+: 18.7%
- WalletHub healthcare ranking: 12th
- Violent crime rate: 374.1 per 100,000 people
Similar to many upper midwestern states, North Dakota seems like a beautiful and relaxing state to spend your years in retirement. However, you may not feel quite the same way during the chilly winters. Additionally, while the overall cost of living is low, taxes for retirees can be relatively high.
While income tax ranges from a modest 1%-2.9%, Social Security benefits are also taxed. However, military pensions are exempt. There’s also a 5% state levy on sales tax, and since localities can add up to 3.5%, the average combined rate is 6.96%. Groceries and prescription drugs are exempt from taxes.
However, healthcare services in North Dakota rank pretty high at 5th place on WalletHub’s list. Although the outcomes are just slightly above average, the cost of care is pretty low, and services are easily accessible, at 7th and 3rd place, respectively.
- MIT’s living wage calculation: $13.79 per hour
- Percent of the population 65+: 15.3%
- WalletHub healthcare ranking: 5th
- Violent crime rate: 280.6 per 100,000 people
In the end, the best place for you to retire comes down to personal preferences. When making your decision, you’ll want to consider the cost, weather, crime rate, and healthcare programs.
However, depending on your situation, your necessities may not line up exactly with what many retirees are looking for. For example, if you’re planning to retire with a large budget, taxes might be more important to you than the cost of living. Either way, it’s important to be informed about your options before deciding where to settle down.
- Vanguard: When to start saving for retirement
- Bankrate: The Best And Worst States For Retirement: All 50 States, Ranked
- The Balance: Choosing the Best Place to Live in Retirement
- Fidelity: How much will you spend in retirement?
- Wolters Kluwer: Whole Ball of Tax 2020 – State Retirement Taxes
- FINRA: Taxation of retirement income
- WalletHub: Best & Worst States for Healthcare
- Current Results: Average Annual Temperatures by USA State
- The Balance: Worst States for You to Retire In
- World Population Review: Most expensive states to live in 2021
- Anchorage Daily News: The price of Alaska: Cost-of-living data shows us where we must improve
- Retirement Living: Best and Worst States for Retirement
- MIT.edu: Living Wage Calculator
- Kiplinger: State-by-State Guide to Taxes on Retirees
- USA Today: Crime in the US: All 50 states ranked by murder, violent crime rates
- PRB: Which U.S. States Have the Oldest Populations?
- Oregon.gov: 2021 Oregon property tax deferral for disabled and senior citizens
- NIH.gov: How Many Seniors Live in Poverty?
- FBI: Violent Crime
- Wikipedia: Pacific Northwest
- Ballotpedia: Arizona Proposition 208, Tax on Incomes Exceeding $250,000 for Teacher Salaries and Schools Initiative (2020)
- Lexington Herald Leader: Kentucky nursing homes are under-staffed, residents at risk