A growing number of retirees are ditching high-tax states for friendlier havens where their savings go further.
Retirement used to mean settling down and living out your golden years in the same town where you worked. But for many Americans, that picture has changed completely. With a bit of planning, your retirement can be an adventure, a chance to live somewhere new and exciting. For those who want to maximize their retirement savings, finding a location with low taxes is akin to finding a pot of gold at the end of the rainbow.
Taxes can take a significant bite out of your hard-earned nest egg, especially on items such as Social Security benefits, retirement account withdrawals, and investment income. But what if you could live somewhere that barely touched those funds? There are places in the United States that offer a financial breather, allowing your money to stretch further and last longer.
These places treat retirees like royalty, leaving more of your cash in your pocket. Here are 12 states where your retirement funds can breathe a sigh of relief.
Washington
Washington state also has no income tax. This means your Social Security benefits, pensions, and withdrawals from retirement accounts are all tax-free. While the cost of living can be high in places like Seattle, there are many smaller, more affordable towns with beautiful scenery. It’s a great option for those who love mountains and rain.
Alaska
The Last Frontier is also a tax-friendly paradise. Alaska has no state income tax, sales tax, or inheritance tax. The state even gives its residents an annual dividend check from its oil fund. It’s a great choice for those who don’t mind a little cold and a lot of beautiful scenery. According to the Alaska Department of Revenue, the 2024 Permanent Fund Dividend was $1,702 per person.
Florida
The Sunshine State is famous for its beaches and warm weather, but it’s also a big draw for retirees because of its lack of state income tax. This means your Social Security benefits, pension income, and retirement account withdrawals are entirely tax-free. It’s no wonder so many people pack up and move south for their golden years. Retirees drive a significant portion of Florida’s population growth, representing more than a quarter.
Nevada
Beyond the bright lights of Las Vegas, Nevada, there is much to offer retirees. The state has no income tax, so your retirement income is safe. There’s also no inheritance tax. Plus, Nevada has a relatively low cost of living compared to other popular retirement spots. It’s a good spot for those who want a desert climate and plenty of outdoor activities.
South Dakota
South Dakota is another state that doesn’t have an income tax. This means all forms of retirement income, including pensions and Social Security, are untaxed at the state level. It also has no inheritance tax. While it may not be a popular tourist destination, it has a low population density and is a peaceful place to settle down. An analysis by the Tax Foundation showed that South Dakota has one of the lowest tax burdens on its residents.
Texas
Everything is bigger in Texas, including the amount of money you get to keep from your retirement accounts. The state has no income tax, which is a significant win for retirees. While property taxes can be higher in some areas, there are numerous cities and towns to choose from, each with its own unique vibe and cost of living. A report by the Texas Workforce Commission indicates that the state’s population is growing due to both job opportunities and favorable living conditions.
Wyoming
Wyoming is a tax-free haven with no income tax, inheritance tax, or estate tax. It’s perfect for those who enjoy the outdoors and a quiet life. The state’s low population and wide-open spaces offer a sense of freedom. It’s a great place to make your retirement savings last, especially if you enjoy fishing, hiking, and taking in stunning views.
New Hampshire
The Granite State has no income tax on wages and no general sales tax. However, it does tax dividends and interest. For many retirees, a majority of their income comes from these sources, so it’s a key detail to consider. On the bright side, the state has no inheritance or estate tax, which is a big plus for those with larger assets.
Tennessee
The Volunteer State is an excellent choice for retirees. It has no income tax on earned wages, and as of 2021, it no longer taxes dividends or interest either. This means all your retirement income is completely tax-free at the state level. Tennessee has a relatively low cost of living and a lot of beautiful natural areas to enjoy. A report from Axios showed that the state has one of the fastest-growing retiree populations.
Mississippi
Mississippi is a surprisingly tax-friendly state for retirees. The state exempts all retirement income from state income tax, including Social Security, pensions, and distributions from 401(k)s and IRAs. It also has a low cost of living, which makes your nest egg go further. It’s an option for those who want a slower pace and a warm climate.
Alabama
The Yellowhammer State is another hidden gem for retirees. Alabama exempts Social Security benefits and most public and private pension income from state income tax. This is a massive benefit for anyone with a pension. The state also has a low property tax rate compared to the national average.
Pennsylvania
Pennsylvania is a good choice for retirees because it exempts all qualified retirement income from state income tax. This includes income from IRAs, 401(k)s, and private pensions. The state’s property taxes can be a bit high, but the income tax exemption can make it a worthwhile trade-off for many. Pennsylvania offers a lot of history and scenic beauty for those who enjoy all four seasons.
Disclaimer – This list is solely the author’s opinion based on research and publicly available information. It is not intended to be professional advice.
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