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? There are some states that might offer a better retirement lifestyle and have certain financial benefits, so we’ve compiled a list of some of the best states to retire in 2021.
Here’s a suggestion: You can understand the impact of retiring in different states in minutes with Personal Capital’s free Retirement Planner. With these online tools, you can anticipate big expenses (like buying a second house or sending kids through college), run different scenarios, and set a spending plan for retirement.
As you consider a big move, use this calculator to check how your retirement savings compare to others in your state.
Does it Make Financial Sense to Relocate in Retirement?
For those of us who want to retire in the U.S., there are nine states that have no state income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. 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?
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, such as being able to roam in nature or (when it’s safe to do so) go out to nice dinners, shows and museums. Many of us won’t have unlimited funds when we reach retirement age, so we may 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 top options 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|
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|
The Best States to Retire in 2021
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. We’ll be following 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.
There’s no definitive answer to the question of which states are the best ones for retirement. Everyone’s 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 two 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 relocating to a lower-tax state. To see if it would make financial sense for you to relocate, 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.
Steve Hansen, Vice President, Underwriting, Architects & Engineers/Contractors Professional Liability, Tokio Marine HCC – Cyber & Professional Lines Group,…