College Towns Are Becoming Retirement Destinations in 2026: How Does the Tax Math Add Up for Retirees?
University and college towns offer a mix of cultural activity and healthcare access that appeals to some retirees. But the tax tradeoffs vary significantly depending on where you land.
It's that time of year again when college is on many people's minds. Students are preparing to graduate after years of learning, growth, and hard work, and high schoolers across the country face Decision Day as they choose where to spend their next four years.
But amid the college admissions and graduation frenzy, there's another interesting trend to consider: from Ann Arbor, Michigan, to Durham, North Carolina, and beyond, so-called "college towns" are emerging as appealing pockets for some older adults.
It's not that hard to see why. Yes, familiarity or nostalgia is likely a factor for some. But the fact is that many college towns offer advantages that surveys show many retirees value. Older adults often seek affordability, good access to healthcare, and a sense of community when deciding where to live, and some college towns check those boxes.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But…financial and tax considerations are often a major part of the "where should I retire" decision, with the latest tax migration data showing millions of people leaving high-tax states for those with low or no personal income taxes.
So, a key question comes to mind…do college towns benefit retirees from a tax perspective?
Why college towns can be ideal for retirement
Some of the most frequently cited reasons that some older adults are attracted to areas anchored by colleges and universities overlap with factors many retirees have long sought in places to live.
For example, an AARP survey underscores that affordable housing and high-quality healthcare are primary drivers in decisions surrounding where to live in retirement. But the survey findings also point to a growing emphasis on lifestyle factors.
- Respondents reportedly highlighted the importance of social connection and communities with local activities and shared spaces.
- Walkability and easy access to everyday essentials also ranked highly.
Interestingly, many of those elements are built into some college towns. Depending on location, housing might be more attainable, while university-affiliated hospitals and medical networks can improve access to high-quality healthcare.
The college environment also often supports convenience, with shops, services, and daily necessities clustered in walkable areas.
Meanwhile, the presence of a college or university in a community often translates into an ongoing mix of events, cultural programming, learning opportunities, and shared spaces. That can make it easier for retirees to create and maintain social connections.
Additionally, various studies find that older adults tend to prefer environments they know well, and that familiarity is associated with comfort, perceived safety, autonomy, and a lower decision burden.
- As a result, some people gravitate toward places they already know. (Enter former college towns or communities they’ve lived in or visited before.)
- That comfort can also make a move feel easier or more natural, especially when paired with the practical benefits some of these places offer.
The overall result is a combination of relative affordability, healthcare access, and everyday accessibility that closely matches what many retirees say they seek.
And let's not forget learning. College towns have built-in infrastructure for lifelong learning that, in some cases, goes beyond casual interest in taking a class or two.
Many universities host formal programs alongside discounted or tuition-free auditing options for older adults. That can turn a college town into an intellectual community for retirees, where lectures, workshops, performances, and public events are part of the everyday landscape.
Best college towns to retire?
Familiarity and lifestyle benefits matter, but affordability, especially housing costs and retirement taxes, are consistently cited as priorities in retirement decisions.
That said, these tradeoffs don’t carry the same weight for everyone. According to AARP’s Home and Community Preferences Survey, things like affordability, healthcare access, and community features vary significantly across adults 50 and older, depending on age and stage of retirement.
That means the “best” college towns for retirement depend less on a universal checklist and more on which constraints matter most to a particular retiree.
Below are several well-known college towns and key tax and cost tradeoffs that help define their appeal. (These are listed alphabetically by town, not ranked, and are merely a handful of examples. And yes, some are technically cities.)
Ann Arbor, Michigan — Home to University of Michigan
Ann Arbor combines a strong academic medical center with Midwestern housing costs.
Median home values typically run at roughly $450K–$550K (estimates cluster between the high-$400Ks and low-$500Ks, depending on methodology and month).
Rents are around $1,800–$2,100. The University of Michigan Health System anchors access to highly ranked care.
Michigan has a relatively modest tax burden on retirement income.
- The state has relatively high property taxes (about 1.5%–1.6% effective) and a 6% sales tax.
- Retirement income is partially taxed, though Social Security is exempt, placing Michigan between no-income-tax states and high-tax coastal markets.
What it means: Ann Arbor offers retirees solid fundamentals — strong healthcare and walkable neighborhoods — with a relatively steady tax burden overall. Housing costs, while less obvious, often act as the main constraint on how much they can afford to spend.
Austin, Texas — Home to University of Texas at Austin
Austin has some of the highest housing costs in this group of popular college towns. Median home values are typically around $500K–$600 or more, and rents are around $1,800–$2,200.
The University of Texas system and Dell Medical School anchor a growing healthcare ecosystem.
- Texas has no state income tax, meaning retirement income is not taxed at the state level.
- A key tradeoff is higher property taxes (often 1.6%–2.0%+) and an 8.25% sales tax.
What it means: Austin’s appeal for retirees depends as much on its structure as on its lifestyle. The city offers strong income‑tax advantages, but those are offset by higher housing and property costs that can limit how far a retirement budget stretches.
Charlottesville, Virginia — Home to University of Virginia
Charlottesville sits between small-town scale and elite university infrastructure. Median home values are around $450K–$550K, and monthly rents are roughly $1,800–$2,000.
- Virginia has a progressive income tax up to 5.75%, along with moderate sales and property taxes that are generally below Northeast levels but higher than those in no-income-tax states.
- Retirement income in the Commonwealth is generally taxable, with partial exemptions available.
What it means: Charlottesville offers high-quality amenities and a strong university presence, but without the intensity of some larger markets.
Durham, North Carolina — Home to Duke University / UNC system
Durham reflects the Research Triangle's growth, with median home values around $400,000 and rents of roughly $1,700–$1,800.
Duke University Hospital and the nearby UNC-Chapel Hill system create a strong healthcare network.
- North Carolina has a flat 3.99% income tax and a combined sales tax rate of about 7.5%.
- Retirement income in NC is generally taxable, though Social Security benefits are exempt, placing retirees in a mid-range tax environment.
What it means: Durham offers a relatively steady tax landscape, while the more noticeable challenge for retirees is the pace of growth. Rising housing costs shape how far retirement budgets can stretch over time.
New Haven, Connecticut — Home to Yale University
New Haven offers relatively moderate median home values ($315K–$325K) by Northeast standards, while rents average $1,900–$2,000 a month.
Yale New Haven Hospital anchors one of the region’s top academic medical systems.
- Connecticut’s tax structure is among the more demanding in this group: property taxes can be high depending on the municipality, sometimes exceeding 2% effective rates.
- The state income tax is progressive, and most retirement income is included, though Social Security is exempt below income thresholds.
What it means: New Haven offers a strong mix of healthcare access and cultural amenities that may appeal to some retirees. However, this can come with a potentially heavier tax burden in Connecticut that can add up over time.
Moving to your college town to retire: Bottom line
Across college towns, differences in housing costs, healthcare access, and tax structures ultimately shape different retirement tradeoffs.
Yet a common thread runs beneath the numbers: the way university anchors can shape daily life in retirement. For some, that makes a college town worth it despite tax or other financial trade-offs.
And in some cases, the decision of where to live in retirement will come down to something simpler: the pull of a familiar place and the chance to reconnect with a town they may never have fully left behind.
Related
