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All Contents © 2018The Kiplinger Washington Editors
By Stacy Rapacon, Online Editor
| June 28, 2016
Where to retire is a deeply personal decision that no one else can make for you. However, if you haven't already settled on a destination, a comprehensive analysis of your options can help narrow your search.
We rated all 50 states based on quantifiable factors that are important to many retirees. Our rankings favored states that are affordable—especially in terms of lower taxes on retirees and lower health care costs. Then we took health into account—both the economic health of each state and the overall health of the population. Finally, we rewarded states with relatively prosperous populations of residents age 65 and up.
The following 10 states span the country and top our rankings of retirement destinations. They offer a wide diversity of climates and lifestyles, so you're likely to find one that suits your tastes. Of course, states are big places, so we narrowed the search even more for you. Within each, we identified a city or two that should hold particular appeal to retirees. Take a look.
The average health care cost in retirement of $387,731 we cite is a lifetime cost for a 65-year-old couple who are expected to live to 87 (husband) and 89 (wife). For a complete explanation of our methodology and our data sources, see the Methodology slide at the end of this slide show.
Population: 1.6 million
Share of population 65+: 14.3% (U.S.: 14.5%)
Cost of living: 10% below the U.S. average
Average income for 65+ households: $37,787 (U.S.: $50,291)
Average health care costs for a retired couple: Below average at $373,109 (U.S.: $387,731)
Idaho's tax rating for retirees: Mixed
Put your potato jokes away, people. Idaho isn't nicknamed the Gem State for nothing. The moniker stems from the state being rich in natural resources and scenic areas including Shoshone Falls in Twin Falls, Hells Canyon in Riggins, Lava Hot Springs (near Pebble Creek Ski Resort) and the Sawtooth Mountains (a range of the Rockies)—all beautiful sights to enjoy throughout the state and your retirement.
And that wealth of nature comes at a low price. The state's affordability, especially with regard to health care costs, makes it easy to stretch your retirement savings. And while the tax picture for retirees is mixed—there's a statewide sales tax of 6% and a state income tax that can go as high as 7.4%—Social Security benefits are not subject to state taxes. Idaho also does not have an inheritance or estate tax.
Boise may be particularly attractive to retirees. Not too long ago we named it one of the best college towns for retirement thanks to the many cultural and sporting events taking place on the campus of Boise State.
Population: 6.6 million
Share of population 65+: 14.2%
Cost of living: 1% above the U.S. average
Average income for 65+ households: $45,236
Average health care costs for a retired couple: Below average at $374,477
Arizona's tax rating for retirees: Most Tax Friendly
The Grand Canyon State, with its ample sunshine, dry heat and beautiful desert landscape, is a popular retirement destination. Prescott, located 100 miles north of Phoenix, has a particularly abundant population of 65-and-older residents, who make up a whopping 26.3% of the metro area's total. And while the state has slightly above-average living costs, Prescott is one of our Cheapest Places Where You'll Want to Retire.
Retired residents throughout the state can also save on taxes. Arizona is one of Kiplinger's 10 Most Tax-Friendly States for Retirees. The state's income tax is modest, and Social Security benefits and a portion of some other types of retirement income are exempt. Plus, there's no inheritance or estate tax.
Population: 19.4 million
Share of population 65+: 18.2%
Cost of living: 1% below the U.S. average
Average income for 65+ households: $47,031
Average health care costs for a retired couple: About average at $389,372
Florida's tax rating for retirees: Most Tax Friendly
More than 3.5 million older residents can't be wrong. Florida is famous for its retiree-haven status, what with its warm weather, beautiful beaches and seven-season-long "Golden Girls" endorsement. But the main attraction for retirees to the Sunshine State must surely be the tax situation. Florida has no state income tax, estate tax or inheritance tax, and it doesn't tax Social Security or other retirement income, either. Plus, those benefits are pretty secure: Florida ranks fifth in the country for fiscal soundness, according to a recent report from the Mercatus Center at George Mason University, in large part due to its abundance of cash versus short-term liabilities.
The state is packed with nice, affordable metro areas, including Fort Myers, Sarasota and Tampa along the Gulf, and Vero Beach on the Atlantic side. And Gainesville is a great college town for retirement. But Punta Gorda tops our rankings for Cheapest Places Where You'll Want to Retire.
Population: 6.9 million
Share of population 65+: 13.2%
Average income for 65+ households: $50,294
Average health care costs for a retired couple: About average at $384,949
Washington's tax rating for retirees: Tax Friendly
The Evergreen State can be a great place to stay refreshed throughout retirement. Washington boasts more than 3,000 miles of coastline and two major mountain ranges: the Cascades and the Olympic Mountains. So active retirees have plenty of opportunities to boat, swim, climb, hike and more. No wonder the state ranks third in the country for physically active seniors, according to the United Health Foundation's senior health rankings report.
Spokane, located about 300 miles east of Seattle, is a nice choice for nature-loving retirees. And when you get tired of hiking, biking, boating and fishing, you can hit the 33 golf courses, more than 20 wineries and many breweries and distilleries around the region. Worried the infamous rainy weather of the region will dampen your good times? Don't. While Seattle does get an average of 36 inches of rain per year (the U.S. average is 37 inches), Spokane sees just half that amount of rainfall. Besides, as Éponine of Les Miserables sings, "A little fall of rain can hardly hurt you now."
Population: 4.7 million
Share of population 65+: 14.7%
Cost of living: 12% below the U.S. average
Average income for 65+ households: $39,985
Average health care costs for a retired couple: Below average at $373,631
South Carolina's tax rating for retirees: Tax Friendly
If the mild weather and southern charm of the Palmetto State isn't enough of a retirement draw for you, surely the affordability can tempt you. On top of well-below-average living costs, the tax situation goes easy on a fixed income, too. South Carolina doesn't tax Social Security benefits and offers generous exemptions on other types of retirement income. It also does not levy an inheritance or estate tax. Property taxes tend to be very low.
Hilton Head Island is a popular retirement spot, but Myrtle Beach is generally more affordable. Both places offer ample amounts of golfing, beach bumming and water activities.
MPearsallArt via Wikimedia Commons
Population: 4.8 million
Share of population 65+: 14.5%
Cost of living: 9% below the U.S. average
Average income for 65+ households: $41,856
Average health care costs for a retired couple: Below average at $370,183
Alabama's tax rating for retirees: Tax Friendly
Retirees are sure to love the Heart of Dixie. You can get many of the benefits of retiring to Florida—warm weather, nice beaches and plenty of golf—all at a lower price. The low living costs extend to health care, for which retirees can expect to spend 4.5% less than the average retired American couple. Taxes are easy on the budget, too, with income tax rates ranging from just 2% to 5%, and Social Security benefits being exempt.
Decatur may be a particularly nice destination for your retirement. Situated along the Tennessee River in northern Alabama, the city offers inexpensive outdoor recreation, including some of the state's best bass fishing in Wheeler Lake.
Population: 6.5 million
Cost of living: 2% below the U.S. average
Average income for 65+ households: $42,218
Average health care costs for a retired couple: Below average at $376,365
Tennessee's tax rating for retirees: Tax Friendly
The Volunteer State is a good choice for budget-conscious retirees. Every major metro area offers below-average living costs in almost every category of expenses, including health care and taxes—among the biggest financial concerns for aging Americans. In fact, there's no state income tax at all. And being economically healthy, Tennessee should have no issues maintaining its tax-friendliness; it ranks eighth of all states for fiscal soundness, according to a recent report from the Mercatus Center at George Mason University.
Check out Chattanooga for its thriving arts and music scene. You can also enjoy the area's outdoor recreation, including biking along the Tennessee River or white-water rafting, depending on your desired level of activity.
Courtesy Sandy Springs Hospitality & Tourism
Population: 9.9 million
Share of population 65+: 11.5%
Cost of living: 6% below the U.S. average
Average income for 65+ households: $47,632
Average health care costs for a retired couple: Below average at $370,010
Georgia's tax rating for retirees: Most Tax Friendly
Another Southern state proves charming for retirees. Warm weather and low living costs make Georgia just peachy for a happy retirement destination. Health care expenses are particularly affordable for retirees, with the lowest estimated costs among our top 10 states for a retired couple. Plus, Georgia's favorable tax situation makes it one of the 10 Best States for Taxes on Retirees.
If you want to enjoy big-city attractions along with the slower pace of a small town, consider Sandy Springs, a suburb of Atlanta.
Population: 2.9 million
Share of population 65+: 9.5%
Cost of living: 8% below the U.S. average
Average income for 65+ households: $49,996
Average health care costs for a retired couple: Below average at $377,405
Utah's tax rating for retirees: Not Tax Friendly
The Beehive State is a particularly sweet spot for retirees. The low living costs help offset some unfriendly state tax laws—Utah is one of the few states that taxes Social Security benefits, for example. And even with income levels for older adults about average for the U.S., the state has the fourth-lowest poverty rate for people 65 and older.
Utah's outdoor recreation options are also sure to keep you buzzing through retirement. There are five national parks, seven national monuments, five national forests and 43 state parks to host all your hiking, climbing, boating and skiing desires. No wonder the state ranks fifth in the U.S. for the overall health of its 65-plus population, according to the United Health Foundation. St. George—on the Arizona border, west of Zion National Park and north of the Grand Canyon—is a nice location for active retirees.
Average income for 65+ households: $39,293
Average health care costs for a retired couple: Below average at $379,948
South Dakota's tax rating for retirees: Most Tax Friendly
The Mount Rushmore State might not be the first place that comes to mind when you dream of where to retire, but it's first place on our list. Affordability is the main factor pushing it to the top spot. In addition to low living expenses, including for health care, South Dakota is one the 10 Best States for Taxes on Retirees. And you can be confident it'll stay that way. The state ranks third in the country for fiscal soundness, according to a recent report from George Mason University's Mercatus Center.
Both Sioux Falls and Rapid City rank among the five best small metro areas for successful aging, according to the Milken Institute, coming in second and fifth, respectively. The former offers a large pool of doctors and nurses, as well as hospitals offering services specialized for the aging population, such as geriatric, hospice and rehabilitation. The latter boasts a low unemployment rate for older workers and a host of growing small businesses, indicating a good environment for any retirees interested in starting an encore career. Bonus: You'll be sure to lure the grandkids for a visit with the promise of a day trip to Mount Rushmore.
SEE ALSO: 23 Cheapest Places Where You Will Want to Retire
To rank all 50 states, we weighed a number of factors:
Taxes on retirees, based on Kiplinger's Retiree Tax Map, which divides states into five categories: Most Tax Friendly, Tax Friendly, Mixed, Not Tax Friendly and Least Tax Friendly.
Cost-of-living, with data provided by FindTheData.com.
Average health care costs in retirement are from HealthView Services and include Medicare, supplemental insurance, dental insurance and out-of-pocket costs for a 65-year-old couple who are both retired and are expected to live to 87 (husband) and 89 (wife). With a national average of $387,731, the average couple can expect to spend about $8,400 per person per year in retirement on health care costs.
Rankings of each state's economic health are provided by the Mercatus Center at George Mason University and are based on various factors including state governments' revenue sources, debts, budgets and abilities to fund pensions, health-care benefits and other services.
Rankings of the health of each state's population of residents 65 and over are from the United Health Foundation and are based on 35 factors ranging from residents' bad habits (smoking and excessive drinking) to the quality of hospital and nursing home care available in the state.
Household incomes and poverty rates are from the U.S. Census Bureau.
Final note: Population data, including the percentage of the population that is age 65 and older, is also provided by the Census data. They are highlighted in these rankings, but were not a factor in our methodology for ranking the states. We provided this additional information for readers to decide for themselves whether they are important factors. Some retirees may want to live in states with higher-than-average retiree populations. For others, this isn't important.
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