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What are the Best States to Retire In?

Congrats! Your kids are out of the house, your mortgage is paid off, and you’re ready to retire. So now the question is: where should you retire?

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Does it Make Financial Sense to Relocate in Retirement?

For those of us who want to retire in the US, there are seven states that have no state income taxes: Washington, Texas, Nevada, North Dakota, Alaska, Wyoming, and Florida. For many retirees with the means to move, it makes financial sense to relocate – especially if their home state has high taxes like California or New York.

What About Retirement Lifestyle?

But money isn’t everything in retirement — there’s no point in having money if you can’t spend it on a lifestyle that makes you happy, whether it be going to shows, eating at nice restaurants, or participating in local social events. San Francisco would rank right up there as an ideal place to retire if it wasn’t so darn expensive. Many of us won’t have unlimited funds when we reach retirement age, so we might need to make sacrifices and relocate.

It’s impossible to say with any real conviction which states offer the best lifestyle for retirees since it’s such a subjective decision. Are you a big city person? Or do you prefer the quiet of a small town? Or maybe you’d prefer a secluded country retreat? Which states offer the best lifestyle is really going to depend on you.

How to Determine the Best State to Retire In

To find an objective answer to the question of what states are the best to retire in, we came up with a relatively simple formula: follow the money!

Millionaires tend to be able to live in places that offer the best lifestyles – of course, anyone can run out of money if they overspend, but the more money you have, the more options you have as to where to live.

So, to come up with the best states for retirees, let’s look at the states with the highest percentage of millionaires and compare that list with the states that have the lowest taxes. That way, we can account for both lifestyle considerations and which states make the most sense from a financial perspective. Obviously, this is really for fun, but it should give you a pretty good idea of some states that make sense for retirees.

Take a look at the charts and see if you can come up with the list without reading ahead.

Which States Have the Lowest Tax Burden?

First, let’s look at the states with the lowest tax burden. Instead of looking at tax rates, which can vary depending on your specific circumstances, the “tax burden” number measures the proportion of total personal income that you’d pay towards state and local taxes. To determine tax burden, we referenced Wallethub’s list that compares the 50 states across three types of state tax: property taxes, individual income taxes, and sales & excise taxes.

Rank State Total Tax Burden Property Tax Burden Individual Income Tax Burden Total Sales & Excise Tax Burden
1 Alaska 5.10% 3.66% 0.00% 1.44%
2 Delaware 5.55% 1.79% 2.55% 1.21%
3 Tennessee 6.28% 1.90% 0.11% 4.27%
4 Florida 6.56% 2.74% 0.00% 3.82%
5 New Hampshire 6.86% 5.45% 0.12% 1.29%
6 Oklahoma 7.12% 1.66% 1.82% 3.64%
7 Montana 7.27% 3.44% 2.58% 1.25%
8 South Dakota 7.28% 2.87% 0.00% 4.41%
9 Alabama 7.28% 1.39% 1.89% 4.00%
10 Wyoming 7.51% 4.32% 0.00 3.19%

Which States Have the Most Millionaires?

Next, to get a read on lifestyle in various states, let’s take a look at the 10 states that have the highest percentage of millionaire households per total households.

Rank State % of millionaire households
1 New Jersey 8.95%
2 Washington, DC 8.94%
3 Connecticut 8.89%
4 Maryland 8.85%
5 Massachusetts 8.60%
6 Hawaii 8.48%
7 New Hampshire 7.98%
8 California 7.78%
9 Alaska 7.71%
10 Virginia 7.66%

The Best States to Retire in 2020

So, what are the best states for retirees? The answer lies in the states that fall onto both the lowest tax burden list and the highest percentage of millionaires list.

The top two states to retire in according to our formula are…drumroll please…Alaska and New Hampshire! Special mentions go to Virginia, Washington, and Delaware which were all in the top 20 on both lists.

It’s interesting to see that low-tax states like Wyoming, South Dakota, and Texas don’t make the top 10, or even the top 20 states with the most millionaires. It’ll be interesting to see if they make the list in future years, since these states offer such good tax benefits.

Delaware is probably the biggest surprise on the shortlist (not a state you typically think of when it comes to concentration of millionaires) followed by Wyoming and Florida not making the list given they are such low-tax states, and both offer great lifestyles. Florida is well-known for beachfront living, and if you’ve ever been to Jackson Hole, you’ll agree Wyoming is a lovely place.

Our Take

There’s no definitive answer to the question of what states are the best ones to retire in. Everyone is a little biased, anyways. Personally, my home State of Hawaii would be wonderful based on lifestyle, but from an affordability standpoint, Colorado, where I’ve been for nearly 2 decades, has many of the same lifestyle perks (believe it or not!) with lower overall costs. Decisions!

So, this list is really for fun, but it also can be a good place to start if you’re thinking of re-locating to a lower-tax state. To see if it would make financial sense for you to re-locate, check out our free Retirement Planner tool, which allows you to do scenario planning to see how it impacts your chances of a successful retirement.

See How Your Retirement Savings Stack Up to Your Peers — Are You Ready to Retire in a New State?

Disclaimer: The information on this website is for informational purposes only and does not constitute a complete description of our investment services or performance. No part of this site nor the links contained therein is a solicitation or offer to sell securities or investment advisory services, except where applicable in states where we are registered, or where an exemption or exclusion from such registration exists. Third party data is obtained from sources believed to be reliable. However, Personal Capital Advisors Corporation cannot guarantee that data’s currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Paul Deer, CFP®
Paul is a Certified Financial Planner® and has been with Personal Capital since they first moved to Denver in 2013. With over a decade of industry experience, Paul’s current role as Director of Advisory Service keeps him focused on a team of over 60 Financial Advisors and their clients.

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