The 20 Worst States for Your Retirement
After analyzing all 50 states for retirement based on financial factors critical to retirees, these ranked as the worst states to retire in 2018.
Deciding where to retire can be as important as planning when to retire. After all, your retirement destination determines how much you’ll need to pay in taxes, what your living costs will be and what kind of health care options you’ll have. And all those factors contribute to the big retirement-planning question: How much money do you need to retire?
The answer in many of the following states is: a lot. We ranked all 50 states for retirement based on financial factors critical to retirees including living expenses, tax situations, health care costs, household incomes, poverty rates and the economic wellness of the state itself, as well as the health status of seniors there. And the bottom of our rankings were littered with high-cost and high-tax areas.
Of course, your decision of where to retire will depend on more than just financial matters. In fact, the top reason people move in retirement is to be closer to family, according to a survey by Merrill Lynch and Age Wave, a research firm focused on the aging population. No matter the reason, if you decide to retire in one of these 20 states, be sure your retirement nest egg is big enough to underwrite your choice.
See "How We Ranked Every State for Retirement" at the end of the rankings for details on our data sources and methodology.
20. Alaska
- Population: 736,855
- Share of population 65+: 9.4% (U.S.: 14.5%)
- Cost of living: 32% above U.S. average
- Average income for 65+ households: $59,230 (U.S.: $53,799)
- Average health care costs for a retired couple: Above average at $467,743 (U.S.: $423,523)
- Tax rating for retirees: Most Tax Friendly
The Last Frontier is the last place most people would choose as a retirement destination. In fact, only 69,305 people in the whole state are age 65 and older—making it the smallest population of seniors in the country. The folks who do brave retiring in Alaska do well, though. They pay no state income or sales tax, and eligible residents get paid an annual dividend check from the state's oil wealth savings account just for living there. In 2017, the payment was $1,100 per person. And despite the state's high living costs, the poverty rate among seniors is the lowest in the U.S. at just 4.5%.
19. Oregon
- Population: 4.0 million
- Share of population 65+: 15.9%
- Cost of living: 18% above U.S. average
- Average income for 65+ households: $45,255
- Average health care costs for a retired couple: Below average at $412,398
- Tax rating for retirees: Not Tax Friendly
Taxes in the Beaver State gnaw away at fixed incomes. It charges no sales tax, but Oregon levies one of the highest top state income tax rates in the U.S., at 9.9%. And although Social Security benefits are exempt, most other retirement income is taxable. Not that there's much to tax. Oregon seniors bring in below-average household incomes—15.9% less than the national average of $53,799. And despite those low incomes, overall living costs are high. One bright, cheap spot: Health care costs for a retired couple in Oregon are typically 2.6% lower than the U.S. average.
18. Minnesota
- Population: 5.5 million
- Share of population 65+: 14.3%
- Cost of living: 4% above the U.S. average
- Average income for 65+ households: $47,838
- Average health care costs for a retired couple: About average at $422,815
- Tax rating for retirees: Least Tax Friendly
The Land of 10,000 Lakes is a hard place for retirees to stay afloat. Above-average living expenses and below-average incomes can equate to imbalanced budgets in retirement. Plus, the tax situation adds an extra burden. One of the 10 Worst States for Taxes on Retirees, Minnesota taxes Social Security benefits to the same extent as the federal government. Most other retirement income, including military, government and private pensions, is also taxable. And the state's sales and income taxes are high.
On the other hand, Minnesota is a great place for health-focused retirees. The state is the healthiest in the country for seniors, according to the United Health Foundation rankings.
17. Kentucky
- Population: 4.4 million
- Share of population 65+: 14.8%
- Cost of living: 14% below the U.S. average
- Average income for 65+ households: $42,666
- Average health care costs for a retired couple: About average at $420,375
- Tax rating for retirees: Most Tax Friendly
Kentucky ranks as the second-worst state in the country in terms of senior health, according to the United Health Foundation. Among its challenges are a high rate of smoking, physical inactivity and poverty, as well as a low number of quality nursing homes.
On the plus side, the Bluegrass State offers low living costs, as well as a number of tax breaks for retirees. Social Security benefits, as well as up to $41,110 of other retirement income, are exempt from state taxes. However, with a low ranking of 47th in the country for fiscal soundness, those tax benefits may not be very secure.
16. Michigan
- Population: 9.9 million
- Share of population 65+: 15.4%
- Cost of living: 12% below U.S. average
- Average income for 65+ households: $44,397
- Average health care costs for a retired couple: About average at $423,608
- Tax rating for retirees: Not Tax Friendly
The Great Lakes State can make for a decent retirement destination. It offers some of the lowest living costs in the country and maintains a low poverty rate among seniors at 8.1%, compared with 9.3% for the U.S. The tax situation, though, is not so great—and a bit complicated. Social Security benefits are not currently taxed, but starting in 2020, taxpayers turning 67 will have to choose between deducting Social Security income or $20,000 of all income sources for single filers ($40,000 for couples).
15. Montana
- Population: 1.0 million
- Share of population 65+: 16.7%
- Cost of living: 3% above the U.S. average
- Average income for 65+ households: $42,367
- Average health care costs for a retired couple: Below average at $413,031
- Tax rating for retirees: Not Tax Friendly
You may have a hard time holding onto your fortune in the Treasure State. Living costs are above average, but incomes are 21.2% below average. The tax situation certainly doesn't help: Montana taxes most forms of retirement income, including Social Security, and the top rate of 6.9% kicks in once taxable income tops just $17,400.
Still, Big Sky Country seems to retain a large number of retirement-age folks: The state's 65-and-older population share is the fifth highest in the U.S. The great (albeit cold) outdoors, including Yellowstone and Glacier national parks, may be what trumps the state's drawbacks for adventurous retirees.
14. West Virginia
- Population: 1.8 million
- Share of population 65+: 17.8%
- Cost of living: 17% below the U.S. average
- Average income for 65+ households: $40,109
- Average health care costs for a retired couple: Below average at $404,606
- Tax rating for retirees: Not Tax Friendly
Despite its below-average living costs, the Mountain State offers some rocky terrain for retirees. Retirement income, including Social Security, is taxed to the same extent as it is on your federal form—though the first $8,000 is exempt. And given the state's fiscal health, its tax situation is unlikely to get friendlier: According to a recent report from the Mercatus Center at George Mason University, West Virginia ranks as the ninth-worst state in terms of fiscal soundness.
The state also scores poorly for the health of its 65-and-over population, ranking 45th in the country, according to the United Health Foundation. While 64.6% of older adults nationwide are considered able-bodied, only 56.6% of those in West Virginia can say the same—the worst in the U.S.
13. Indiana
- Population: 6.6 million
- Share of population 65+: 14.3%
- Cost of living: 15% below the U.S. average
- Average income for 65+ households: $42,303
- Average health care costs for a retired couple: About average at $425,365
- Tax rating for retirees: Least Tax Friendly
With its below-average living expenses, Indiana might seem like a winner for retirees. But when you consider the well-below-average household income—at 21.4% below average, to be exact—the older residents of the Hoosier State start looking more like underdogs. And the tax situation doesn't help: Most retirement income other than Social Security benefits is taxable at ordinary rates.
12. New Mexico
- Population: 2.1 million
- Share of population 65+: 15.3%
- Cost of living: 5% below U.S. average
- Average income for 65+ households: $46,836
- Average health care costs for a retired couple: Below average at $380,164
- Tax rating for retirees: Least Tax Friendly
The Land of Enchantment is not such a magical place for retirees. The tax breaks, for one thing, leave something to be desired: Social Security benefits are subject to tax by the state, as are retirement account distributions and pension payouts, though low-income seniors may qualify for a retirement-income exemption of up to $8,000. Unfortunately, plenty of people may be able to take advantage of that break, after all. The poverty rate for people 65 and older is 11.9%, the third highest in the country.
11. Vermont
- Population: 626,249
- Share of population 65+: 17.0%
- Cost of living: 12% above the U.S. average
- Average income for 65+ households: $45,755
- Average health care costs for a retired couple: Below average at $408,038
- Tax rating for retirees: Least Tax Friendly
Steep living costs and taxes weigh heavily on below-average incomes in the Green Mountain State. Social Security benefits, as well as most other forms of retirement income, are subject to state taxes, and the top income tax rate is a high 8.95% (which kicks in at $416,500 for single filers and $421,900 for joint filers).
On a positive note, Vermont ranks eighth in the country in terms of senior health, according to the United Health Foundation's rankings.
10. Wisconsin
- Population: 5.8 million
- Share of population 65+: 15.2%
- Cost of living: 4% below U.S. average
- Average income for 65+ households: $40,011
- Average health care costs for a retired couple: About average at $423,978
- Tax rating for retirees: Least Tax Friendly
Wisconsin seniors suffer the lowest average household income in the nation. And yet, the living costs are only a bit below average, and a 65-year-old couple actually faces slightly higher-than-average health care costs in retirement. And taxes only make the situation worse: Social Security benefits are exempt from state taxes, but most other retirement income is subject to taxation (though there are some breaks for low-income residents).
9. Louisiana
- Population: 4.6 million
- Share of population 65+: 13.6%
- Cost of living: 10% below U.S. average
- Average income for 65+ households: $50,744
- Average health care costs for a retired couple: Above average at $432,292
- Tax rating for retirees: Tax Friendly
The living costs are low in Louisiana, but so are the incomes. And health care costs still prove to be pricey with a 65-year-old couple in the state expected to pay 2.1% more than the average American couple of the same age. One driver of those high costs may be the local population's poor health. Indeed, Louisiana had the fourth lowest senior health score, according to the United Health Foundation, in part due to high rates of obesity, smoking and mental distress, as well as low availability of geriatricians and quality nursing homes. The poverty rate for people age 65 and older is also remarkably high at 12.9%, behind only Mississippi for the highest in the U.S.
8. Illinois
- Population: 12.9 million
- Share of population 65+: 13.9%
- Cost of living: 4% below U.S. average
- Average income for 65+ households: $54,051
- Average health care costs for a retired couple: Above average at $435,889
- Tax rating for retirees: Mixed
The Prairie State's fiscal standing has been sliding downward for years. Illinois has weighty long-term debts, large unfunded pension liabilities and big budget imbalances. All this puts it in the second-lowest spot on the state rankings for fiscal soundness, behind only New Jersey, according to George Mason University's Mercatus Center. In October 2015, ratings agency Fitch downgraded the state's credit rating to near-junk status. That means the tax breaks on a variety of retirement income sources, including 401(k) plans and individual retirement accounts, are hardly assured, and higher taxes are on the table. Already, state and local sales taxes are as high as 11% in some areas.
7. Rhode Island
- Population: 1.1 million
- Share of population 65+: 15.8%
- Cost of living: 22% above the U.S. average
- Average income for 65+ households: $55,674
- Average health care costs for a retired couple: Above average at $428,144
- Tax rating for retirees: Not Tax Friendly
Tiny Rhode Island packs in big costs. Living expenses across the board are well above average with health care costs for a 65-year-old couple 1.1% higher than average. At least above-average incomes for older residents can make those burdensome costs a bit more bearable. Also, the tax situation has been improving—the Ocean State no longer taxes Social Security benefits for single filers with up to $80,000 in adjusted gross income and joint filers with up to $100,000 in AGI. And up to the first $15,000 of retirement income may be exempt for retirees, depending on income levels. Still, the updated tax situation is not enough to move it out of not-friendly territory for retirees.
6. California
- Population: 38.7 million
- Share of population 65+: 12.9%
- Cost of living: 52% above the U.S. average
- Average income for 65+ households: $65,904
- Average health care costs for a retired couple: Above average at $430,867
- Tax rating for retirees: Mixed
The Golden State sports the second-highest living costs in the country, behind only Hawaii. And though the average household income for seniors is well-above average, plenty of older residents are unable to bear the heavy burden: 1 in 10 Californians age 65 and over are living in poverty. The tax situation adds to the gravity: Except for Social Security benefits, retirement income is fully taxed, and California imposes the highest state income tax rates in the nation (the top rate is 13.3% for single filers with $1 million incomes and joint filers with incomes above $1,074,996).
One bright spot: If you're over age 65, you can claim an extra $110 exemption off your tax bill. But with a low score for fiscal soundness—the eighth worst in the country—California may not be able to afford such a generous offering in the future.
5. Connecticut
- Population: 3.6 million
- Share of population 65+: 15.5%
- Cost of living: 24% above the U.S. average
- Average income for 65+ households: $68,845
- Average health care costs for a retired couple: Above average at $439,191
- Tax rating for retirees: Least Tax Friendly
The Constitution State does little to promote the general welfare of its resident retirees. In fact, Connecticut ranks among the 10 tax-unfriendliest states for retirees. Real estate taxes are the second-highest in the country. Some residents face taxes on Social Security benefits, and most other retirement income is fully taxed, with no exemptions or tax credits to ease the burden.
All those taxes come on top of high living costs. But Connecticut residents may be able to afford it: The state's average household income for seniors is the fourth-highest in the U.S., and its poverty rate for residents age 65 and older is a low 7.1% vs. 9.3% for the U.S.
4. New Jersey
- Population: 8.9 million
- Share of population 65+: 14.7%
- Cost of living: 27% above the U.S. average
- Average income for 65+ households: $69,710
- Average health care costs for a retired couple: Above average at $440,299
- Tax rating for retirees: Mixed
Retirees planning to plant themselves in the Garden State might want to think twice. Living costs are the fifth-highest in the country, with retiree health care costs ranking third-highest. Plus, property taxes rank highest in the nation—a negative made even worse with the new tax law limiting how much of such tax payments is deductible. To top it off, with the worst ranking for fiscal soundness in the U.S., New Jersey's tax picture is unlikely to improve soon.
Still, residents seem to bear the burden well. The average income for 65-and-up residents is the third-highest in the U.S., and the poverty rate for the age group is a low 8.1% (9.3% nationwide).
3. Maryland
- Population: 6.0 million
- Share of population 65+: 13.8%
- Cost of living: 17% above U.S. average
- Average income for 65+ households: $70,874
- Average health care costs for a retired couple: Above average at $436,074
- Tax rating for retirees: Least Tax Friendly
Retirees in Maryland are bound to be crabby. The average household income for people age 65 and older is the second-highest in the country—but it gets pinched plenty by high taxes and living costs. The Free State doesn't tax Social Security benefits, but distributions from individual retirement accounts are fully taxable. And the taxes keep coming even after you pass: Maryland is the only state that has an estate and an inheritance tax, albeit only at lofty thresholds with the former only applying to estates exceeding $4 million in value in 2018.
2. Massachusetts
- Population: 6.7 million
- Share of population 65+: 15.1%
- Cost of living: 38% above the U.S. average
- Average income for 65+ households: $65,312
- Average health care costs for a retired couple: Above average at $450,383
- Tax rating for retirees: Not Tax Friendly
The Bay State harbors some heavy costs for retirees. On top of the third-highest overall living costs in the country, it also holds the second-highest health-care costs for a 65-year-old couple, trailing only Alaska. And though the average household income for seniors is high, taxes can take a big bite out of those earnings. Social Security benefits are exempt, but most other retirement income is taxed at the state's flat rate of 5.15%. Plus, given its low fiscal wellness—the third-worst in the U.S., according to Mercatus Center at George Mason University—the tax situation is likely to get harsher before it gets friendlier to retirees.
1. New York
- Population: 19.7 million
- Share of population 65+: 14.7%
- Cost of living: 22% above the U.S. average
- Average income for 65+ households: $67,140
- Average health care costs for a retired couple: Above average at $433,347
- Tax rating for retirees: Not Tax Friendly
One (pricey) Big Apple spoils the entire Empire State. Manhattan reigns as the most expensive place to live in the U.S., with costs soaring 138.6% above the national average, according to the Council for Community and Economic Research. However, New York state's relatively lower average cost of living means you can find more affordable spots outside the city: Brooklyn, for example, is “just” 82% more expensive than the average U.S. metro area, and Rochester and Utica actually offer below-average living costs.
Despite boasting an average income for residents age 65 and older that's among the top five in the country, the same age group suffers a poverty rate of 11.4%, worse than the national 9.3% rate and tied with Kentucky for the fourth-highest rate in the country.
How We Ranked Every State for Retirement
To rank all 50 states for retirement, 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 for each state, with data provided by Sperling's Best Places, includes overall costs—across all age groups—for housing, food and groceries, transportation, utilities, health care and miscellaneous expenses.
- 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).
- 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 34 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.
- Population data, including the percentage of the population that is age 65 and older, is also provided by the Census Bureau. They are highlighted in these rankings for the benefit of readers, but were not factors in our methodology for ranking the states.
