Every year across America, millions move to a different state. Roughly 20% of the population did so in 2022, and that also held true for retirees in 2025. Some are drawn by the weather, the lifestyle, or simply a desire to be closer to family and friends. However, for many, affordability also plays a role. That's especially true for retirees living on a fixed income or for those simply trying to maintain their standard of living over a retirement that could last as long as 30 years.
What Makes Retirement Affordable?
So, what makes one state more affordable than another? For employees making this assessment, advises taking three key factors into consideration: state taxes, the cost of living, and the cost of long-term care.
1. State Taxes
After spending years saving up for retirement, some investors are surprised to discover that withdrawals from traditional retirement accounts, such as 401(k) plans and IRAs, are taxable. Employees looking to mitigate this tax burden can do so by moving to a state that doesn't tax retirement income. As of 2026, 13 states fell into this category: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Yet, other taxes may apply to different types of retirement income, such as pensions and Social Security benefits. Additionally, states tax more than just retirement income, levying fees on goods such as retail sales, owned property, and fuel. This makes it important to consider each state's overall tax structure.
To facilitate this type of comparison, the Tax Foundation annually reviews individual income, sales, corporate, property, wealth, unemployment insurance, use, and excise taxes in each state to compile its State Tax Competitiveness Index. For 2026, the 10 most tax-friendly states are Alaska, Florida, Idaho, Indiana, Montana, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. States of particular note include:
2. The Cost of Living
Although high taxes can impact retirement lifestyles, they aren't the only factor to consider when it comes to affordability. The cost of living is also a critical consideration. At a high level, a cost-of-living index (COLI) calculates how much money people need to cover basic expenses such as food, housing, health care, utilities, transportation, and clothing.
Not surprisingly, the largest expenditure is on housing and housing-related costs, which account for roughly 35% of Americans' spending. This is followed by transportation, food (including groceries and eating out), and health care. However, the relative amounts allocated to each of those expenses vary by state. For 2026, the states with the lowest cost of living include Alabama, Arkansas, Iowa, Kansas, Mississippi, Missouri, Oklahoma, and West Virginia.
Notably, despite these state-level rankings, cost of living can differ considerably from one city to the next. So even within the same state, it may cost more to live in an urban neighborhood than a rural area. Fortune 500 retirees looking to hone in on specific cities might consider Huntsville, Alabama; Davenport, Iowa; Wichita, Kansas; or Oklahoma City.
3. The Cost of Long-Term Care
Although it can be hard to contemplate, someone turning 65 today has almost a 70% chance of needing some type of long-term care during their remaining years. This may include in-home care, nursing homes, or assisted living communities. Given these realities, employees looking for affordable states for retirees may want to factor the costs of care into their calculations.
Looking at national averages, nursing home care typically costs the most per year, followed by in-home care from a nonmedical caregiver. Assisted living communities tend to offer the most cost-effective option. However, like all other costs, these expenses vary by state. States that feature the lowest annual costs for long-term care include:
Finding the Sweet Spot of Retirement Affordability
Given the multitude of factors that can affect financial well-being, the states that are most affordable may differ for each retiree. Ultimately, the decision comes down to what an individual or family values.
Those who prioritize lower taxes may be willing to live in states with a higher cost of living. Retirees more concerned about affordable long-term care may be willing to pay higher taxes. And employees looking for the sweet spot may prefer to find a state that finds a balance between tax, cost of living, and long-term care affordability. The following comparison table may help:
More Than Money: Looking Beyond Affordability
With 67% of Americans concerned about outliving their savings, finding an affordable state to retire is critical. However, the decision to move to a new location during retirement generally involves more than a financial analysis. It's also important to consider factors such as access to health care and quality of life.
According to the United Health Foundation's 2025 Annual Report, the states that offer the healthiest physical and social environments, the best clinical care, and the highest health outcomes include Connecticut, Massachusetts, New Hampshire, Utah, and Vermont. Only one of these (New Hampshire) ranks as an affordable state to retire. That said, several of the more affordable states still get honorable mentions when it comes to health rankings, including Washington (#7), Iowa (#17), and South Dakota (#23).
Quality of life also matters, taking into account elements such as residents' well-being, percentage of seniors in the population, mild weather, crime rates, and access to parks and golf courses. Using these metrics, states with high quality of life include Florida, Hawai'i, Maine, Montana, and Wyoming—with Florida, Montana, and Wyoming also ranking well for affordability.
Making a Smart Move
The decision to relocate for retirement is not one that should be made lightly. While retirees may be able to stretch their dollars further by moving to a more affordable state, it's important to understand the potential trade-offs. Lower taxes could save money, but tax laws are subject to change. The same is true for a low cost of living, especially in a macroeconomic environment subject to volatility and inflationary pressure.
Disclosures: Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.