Retiring is the ultimate financial dream for most of us, and a reality for more and more Americans each year. Estimates indicate that by the year 2030, the over-65 crowd will make up 20% of the U.S. population. If you're one of the millions of people approaching retirement age, you may very well be considering relocating to another state as the ideal way to enjoy your golden years.
Cost of living, taxes, and even the unemployment rate if you're one of the many seniors who continue to work part-time, should all play a starring role in your research.
Planning is the most crucial aspect of making sure your move goes smoothly and your retirement is everything you've imagined. Effective retirement planning means taking multiple factors into consideration before making a final decision about where to settle down.
Finances are obviously a major component of your decision-making process. Cost of living, taxes, and even the unemployment rate if you're one of the many seniors who continue to work part-time should all play a starring role in your research.
There are other factors to consider as well in regards to your retirement destination, such as crime rates, transportation (should you need it), and climate. We've analyzed the most important elements of post-career life to give you a jump-start on making the best choice for your big move.
Below you'll find a breakdown of the data on population and retirement trends, key resources to use when preparing for retirement, and our findings for the best (and worst) states to retire to.
In This Guide
Before we delve into the details, let's look at an overview of the main findings in our study:
- Tax policies vary among states - some are more retirement-friendly than others, however other factors can reduce the impact of lower taxes, making it necessary to assess the big picture.
- The financial behaviors of the growing population of retirement-age baby boomers can have an effect on which states are most desirable.
- Life expectancy is higher in some states and lower in others.
- Healthcare expenses, which are a major concern for senior citizens, can vary by state.
To begin, it's important to examine where people of retirement age (60s-70s) currently live. Using studies conducted by the Administration on Aging, we found the states with the highest retirement-age population are: California, Florida, Illinois, New York, Ohio, Pennsylvania and Texas.
States with the Highest Retirement-Aged Population
What do these states have in common when it comes to being attractive to seniors? While climate certainly plays a role, as evidenced by the popularity of areas such as California, Texas, and Florida, it doesn't tell the whole story.
For example, what makes Ohio appealing for those about to retire? We looked at several financial factors to determine which ones have the most influence on a state's ability to draw in older Americans.
The Best States to Retire in for Taxes
When you are considering a state as a candidate for your retirement, one big factor is how tax-friendly it is for seniors. Your post-retirement tax bracket will depend upon how you draw your income out of your investments, as well as whether you still earn an income through part-time employment.
In general, however, there are a few tax policies that have a big impact on retirees. Here are some important state tax policies to consider:
- Is there a state income tax? If you're not making a consistent income, extra costs like a state income tax can diminish any extra resources that you might want to earn.
- Is there a state sales tax? Getting nickeled and dimed with every purchase can be an unnecessary burden on your budget. Some states have a low sales tax or none at all.
- How much are you going to pay for real estate? You might want to downsize and move into a rental or buy a smaller house. Some states have high property taxes, even for smaller homes.
- What about estate and inheritance taxes? If you want to leave your family money, your retirement state might expect a cut.
Here are some of the most tax-friendly states for retirees based upon income, property, and sales taxes:
Most Tax-Friendly States for Retirees
Growth of Retiring Baby Boomers
If you're preparing to retire, you're almost certainly a member of the baby boomer generation. With approximately four million boomers retiring each year, you and your peers are having a larger effect on the economy than any generation in history. Baby boomers are also making waves with their non-traditional financial behaviors:
- According to a report by Investopedia, many retirees are defying conventional wisdom by upsizing instead of downsizing their homes. This is occurring for a number of reasons, including the fact that many seniors want room for grandchildren and other family members.
- The Bureau of Labor Statistics reported in 2014 that men approaching retirement age (62 to 64) who are looking for work increased from 45 percent in 1994 to 56 percent in 2012.
- More baby boomers carry non-mortgage debt than in the past, up from 30 percent in 1998 to 44 percent in 2012.
What do these numbers mean, taken as a whole? Choosing a state with a reasonable cost of living and a solid economic status is more important than ever in order to maintain financial solvency throughout your later years.
Projected Growth of Retired Aged Population
All of this leads to the following conclusion: employment, housing values, taxes and healthcare expenses are going to be among the most important considerations for baby boomers since these will most directly influence their finances.
Healthcare Premiums by State
Healthcare costs are also a major consideration in deciding where to relocate after you retire. According to the NCOA (National Council on Aging), 92 percent of older Americans struggle with at least one chronic health issue. Keeping health insurance premiums, co-pays, and prescription costs under control will be a vital aspect of your retirement plan.
Strategies When Deciding the Best State to Retire
Planning where to move when you retire isn't something to leave for the last minute. If you're in your 50s, now is the perfect time to start assessing the factors that will influence your relocation plans.
Calculating Monthly Expenses
As we've discussed throughout this guide, the main aspect to take into account is your finances. It's important that you first sit down and calculate what your living expenses will be. There are plenty of online tools to help you do this, including calculators like the one supplied by Take Charge America.
When you compile totals, it's important to examine a few months of expenses since some of them will fluctuate. For example, instead of looking at how much you spent on groceries in the past month, calculate the last three months of food expenditures (both on eating in and out) then divide that total by three to give you an average. The goal here is to accurately ballpark how much will come out of your retirement savings each month.
Calculating Projected Retirement Income
Next, the United States Department of Bureau of Labor recommends you calculate how much you'll receive from social security – if eligible. You can do this by visiting the website to use the quick calculator, or by contacting them. This is an important step because social security can account for as much as 40 percent of the income you earned before retirement age.
Once you have an accurate picture of your finances, then you can move on to decide if you want to move, and if so, where. Since your financial outlook will have much to do with it, it's important to consider the following as you make your decision:
- Do you own your home? If so, how much is it worth? How's the real estate market in your area? If you want to move, it's a good idea to find out your home's worth and the local market conditions to determine if now is the right time to sell.
- Dovetailing off the previous point, what are your ideal living conditions? Homes require much in the way of upkeep, while condos and apartments do not. If you plan to travel and don't want the time or expense it will take for home repairs, then it's a good choice to sell, if market conditions are right.
- Next, you should consider what you plan to do recreationally after you retire. Does your current home have easy access to the things you want to do? If you plan on moving, where will ease of access to recreational activities rank in your priorities?
- Using the same principle, does your community offer easy accessibility to affordable health care services you might require?
- Is there adequate public transportation available should you reach a point where you can no longer drive?
- Lastly, how much does climate play a role in shaping your decision?
These questions can help you narrow down your preferences to locations that appeal to your wants and needs.
Resources to Assist You in Your Retirement Planning
Making all of these decisions can feel overwhelming, even if you're getting a head start on planning years in advance. You don't have to go it alone - there are ways to get help in ensuring you're making the right choices.
Consult a Professional
No matter which stage of retirement planning you're in, it's wise to meet regularly with a financial advisor or personal banker who can provide you with fresh insight into your finances, and even keep you on course to achieve your goals.
Professionals are also great resources to assist you when determining where you would like to relocate for retirement. To find assistance, you can consult your local bank, credit union, investment broker or even a reputable consumer credit counseling agency, as they offer retirement planning services.
Seek Advice From Others
Another good rule of thumb, especially if you plan to relocate after retiring, is to connect with others who have gone through this process. Whether it's a family member, friend or trusted colleague, asking them questions about how they prepared, who helped them and how they handled the adjustment is an insightful way to learn more about relocating.
Get a Firsthand Look
Lastly, if you plan to relocate, it's important to visit the state to explore it for yourself. Find an area that resonates with you and offers many of the services you might require such as accessibility to recreational activities and healthcare.
You can also use the visit to speak with a real estate agent or broker and ask them about the market and where they feel it will head in the future. This is an excellent way to receive insight that could help you make the choice as to what you would like to buy or rent, be it an apartment, condo or home; and most importantly, where.
Meanwhile, if you are not quite ready to retire yet, but need more insight into the right financial strategies to prepare for it, there are many informative resources available for you. To illustrate, some websites, like the United States Department of Labor, offer simple ways you can prepare for your retirement by contributing to your employer's retirement savings plan or opening an IRA (Individual Retirement Account).
We also provide you with more retirement advice resources, such as the Best IRA Accounts, which examines in detail what they are, how they can aid you in preparing for retirement and some things to consider when choosing one.
We also have reviews on the top IRA providers, where you can learn more about their individual offerings to better assist you in setting up an account. We also offer suggestions to build more wealth for the 20 to 30 years of retirement you might have as well as provide resources to assist you in preparing for this important time of your life.
The Best Retirement States
Now that you've got a solid picture of the characteristics to keep in mind during the planning process, we'll review the 10 best and 10 worst states to retire in. In composing these lists, we looked at two of the most critical factors that influenced baby boomers – healthcare expenses (individual premium averages) and unemployment rates. These two metrics give you a good indicator of the economy of a state, thereby making it easier for you to find the one that's most suitable for your financial needs.
We also took into consideration other statistical factors which can affect your final decision. To determine the best states for retirement we ranked each state in five following categories:
- Life Expectancy: Some states seem to be better for the longevity of its citizens. If you are going to retire in a state, it might as well be known for having residents that enjoy long lives.
- Tax Friendliness: We based our tax-friendliness ratings on state sales tax, real estate taxes, state income tax, and inheritance tax.
- Violent Crime Rate: States with high violent crime rates aren't ideal for anyone, least of all people who are trying to enjoy retirement.
- Healthcare Costs: As you grow older you may need to rely upon your state's healthcare system. Some states have more affordable premiums than others. You can compare the best health insurance companies here.
- Cost of Living Index: A state's cost of living has a big impact on what your retirement budget looks like in terms of daily expenses like groceries and gasoline.
While other considerations may be necessary, such as proximity to family, the above factors give you a good overview of a state's ability to serve the needs of older people.
The 10 Best States to Retire
|Rank||State||Life Expectancy||Tax Friendliness Rank||Violent Crime Rate Per 100,000||COLI||Healthcare Costs Per Capita|
The Worst Retirement States
Based on the same factors, we determined that some places are less desirable as retirement states. However, take a look at each factor individually. If one category is more important than another, it may affect your own personal perspective on each state. For instance, even though it scored low in the other categories, Alaska was number one in tax friendliness. Your ultimate decision should be tailored to your specific needs.
The 10 Worst States to Retire
|Rank||State||Life Expectancy||Tax Friendliness Rank||Violent Crime||COLI||Healthcare Costs Per Capita|
Though the facts and figures define the best retirement states from a practical viewpoint, there are other things you should consider before choosing a place to retire. Some states that didn't make the top 10 list have senior-friendly features which may tip them in your favor. For instance, Florida and California are popular retirement destinations because of their comfortable climates and nearly constant sunshine.
If you are not yet at retirement age, it's important to start preparing for it as soon as possible. For instance, starting a 401(k) or an IRA account can open up your options when it comes to choosing a retirement destination. The most important thing is knowing exactly what you want and creating a blueprint to get there.
After you've made your move, be sure to stay in touch with friends and family! You can compare cell phone plans here to see plans tailored to how often you talk and text, and whether you need to make international calls--in case you've retired to Aruba.
For more of our in-depth data studies, take a look at our report on the facts and statistics behind average American credit card debt.