The 5 Best States for Senior Citizens to Retire In

Senior citizens are looking to extend their nest eggs further than ever; here are five states where seniors can get the most for their dollars.

Aug 24, 2014 at 7:05AM

Baby boomers may have provided the bulk of the productivity surge in this country during the past couple of decades, but now they're retiring in unprecedented numbers. This is setting in motion a number of interesting scenarios.

Some retirees are still recovering from the Great Recession swoon. Many are concerned about the Social Security funding gap, and some need their nest eggs to stretch further because people are living longer than ever these days.

But for all retirees, choosing where to retire can be just as important as choosing when to retire.

Www
Source: Flickr user Moodboard.

The five best states for senior citizens to retire in
As we saw last weekend, more than a dozen U.S. states tax Social Security income either at the federal rate or at rates based on their own formulas. In addition, sales tax, property tax, and a bevy of other costs can vary throughout the country. Thus some states let senior citizens hang on to more of their hard-earned cash than others do.

Thankfully, Bankrate has done the hard work for us. By using a number of factors that include tax burden, cost of living, access to healthcare, crime rate, and even weather, it has ranked the top states for senior citizens to retire in. According to Bankrate's findings, here are the five best states for retirement, in ascending order:

Www
Grand Teton National Park, Wyoming. Source: Dawn Ellner via Flickr.

5. Wyoming
For those who are keen on big tax savings Wyoming is a state that's likely been on your radar for a long time. Some of the prime advantages of living out your golden years in Wyoming include no estate or inheritance tax, no state income tax, and a minuscule 4% state sales tax. In addition, according to the Tax Foundation, the state's property tax rate averages less than 0.6% of median property values, and its average combined state and local tax burden of 5.34% is good enough to rank eighth-lowest in the country.

"Why the low taxes," you ask? Wyoming sits on a hotbed of oil and gas shale deposits, so its asset-rich lands have provided ample benefits for retirees within the state. As an added bonus, Bankrate notes that the crime rate is also relatively low. 

File
J. Nelson Kelly House in Grand Forks, N.D. Source: Wikimedia Commons user Glorioussandwich.

4. North Dakota
Retirees in North Dakota have to fork over a bit more tax money than Wyoming retirees. North Dakota residents are subject to Social Security taxation up to the extent that it's taxed on a federal level, and they're also fully taxed on private pensions. As for state and local taxes, North Dakota's are below the national average of 9.8%. North Dakota's income tax rate varies between 1.51% and 3.99%, while its sales tax rate is a flat 5%.

So what makes North Dakota so attractive for retirees? Aside from a low cost of living -- once again stemming from oil and gas finds in the state -- Bankrate said the main draw is the fact that its residents appear to be the happiest and healthiest in the nation.

The measurement used here was the Gallup-Healthways Well-Being Index, which surveys 500 people per day in an effort to determine their perceived "well-being" based on a number of factors, including their emotional, physical, and financial health. The latest Well-Being Index in 2013 ranked North Dakota as No. 1 in the country in terms of "physical health" and "work environment," No. 2 in "emotional health," and No. 4 in "life evaluation." Enjoying retirement isn't just about money, but rather overall happiness -- and this annual survey suggests that North Dakotans are a pretty happy bunch.  

Utah
Arch stones in Utah. Source: Pixabay user LoggaWiggler

3. Utah
The reason retirees may want to choose Utah as a top retirement destination is that it offers a blend of some of the points we've touched upon already.

Although Utah does tax Social Security income, for example, it affords its residents the opportunity to claim a retirement tax credit depending on a number of factors, including their age and their annual income (the credit phases out at $25,000 for an individual filer). In other words, there are ways of being exempt from Social Security taxation in Utah. 

Utah also has some of the most affordable housing relative to the income of its residents. In late 2012, the National Association of Home Builders/Wells Fargo Housing Opportunity Index singled out Ogden, Utah as No. 1 in the country in terms of housing affordability. Presumably, things have changed a bit since this NAHB report was issued, but Utah remains a prime destination for retirees who are looking to stretch their dollar when buying a home. 

Colorado Mountain View
Source: Pixabay user Simplyelke.

2. Colorado
Similar to Utah, Colorado has a bit of everything to offer to retirees. Colorado has no estate or inheritance tax, it offers an easy-to-understand flat-tax of 4.63%, and median property taxes are fairly low, with the Tax Foundation noting that the median homeowner paid just $1,437 in property taxes on a home worth $237,800. To add some context, in 2012 the average U.S. homeowner forked over $2,800 in property taxes. 

But Colorado isn't perfect, as some retirees will need to pay tax on Social Security income. For instance, Colorado residents aged 55 to 64 are allowed to exclude up to $20,000 in Social Security and retirement income from state taxes. For those aged 65 and up, that exclusion jumps to $24,000. Of course, if you're making more than the exclusionary amount, prepare to open up your wallet.

On top of its generally favorable tax rates, Colorado also scored in the top seven in the Gallup-Healthways Well-Being Index for "life evaluation," "healthy behaviors," and "physical health."

Mount Rushmore
Mount Rushmore, S.D. Source: Pixabay user Werner22brigitte.

1. South Dakota
Notice a trend of where these five states are located?

Tying together everything we've learned about the four aforementioned states, the draw of South Dakota is a mix of exceptionally low tax rates and high ranks on the Gallup-Healthways Well-Being Index.

Specifically, South Dakota is one of only seven states in the country that have no income tax. Add in a state sales tax of just 4% and municipality tax rates that are typically 2% or less, and you can begin to see how retirees can save a pretty penny in the home of Mount Rushmore. As with a number of other states in the region, South Dakota's vast energy assets allow the state to skip on collecting an income tax, as the energy boom is generating more than enough revenue.

In terms of well-being, South Dakota ranked No. 2 in the country behind only North Dakota. South Dakota finished second in "work environment," third in "emotional health," fifth in "basic access" to medical care, and eighth in "life evaluation."

Here are a few simple ways you can get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers