Some seniors choose a state to retire to based on its climate. Others make that decision based on proximity to family and friends. These are, of course, important considerations when determining where you'll settle down in retirement -- but there are a number of financial factors to think about, too. Here are three reasons why your state of choice for retirement could spell the difference between living comfortably and winding up cash-strapped.

1. Some states have no income tax

Income taxes affect your financial health as a senior, and they're higher in some states than in others. In fact, there are seven states that don't charge income taxes at all:

  1. Alaska
  2. Florida
  3. Nevada
  4. South Dakota
  5. Texas
  6. Washington
  7. Wyoming

Also, while New Hampshire and Tennessee charge taxes on interest and dividend income, they don't impose a tax on ordinary income -- and both states are in the process of phasing out their existing interest and dividend taxes as well. Avoiding state income taxes could result in serious savings, so keep that in mind as you narrow down your choices. 

A map of the U.S. with paper currency pasted over it.

Image source: Getty Images

2. Some states tax Social Security benefits

Whether you'll pay federal taxes on your Social Security benefits will depend on what your total income situation looks like. But it's not just federal taxes you'll need to worry about. Some states impose their own taxes on Social Security as well -- these 13, to be precise:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. North Dakota
  10. Rhode Island
  11. Utah
  12. Vermont
  13. West Virginia

Now the good news is that many of the above states offer some sort of exemption on paying taxes for lower or moderate earners. But Minnesota, North Dakota, Vermont, and West Virginia don't offer seniors on Social Security an exemption at all.

3. Some states have better Medicare Advantage plans than others

If you're planning to get health coverage in retirement through original Medicare -- Parts A, B, and D -- then you don't really need to worry about the state you choose to live in. But if you're planning to sign up for Medicare Advantage -- an alternative to original Medicare -- then your home state makes a difference. The cost and availability of Medicare Advantage plans vary by state, and if you choose the wrong location, you could wind up paying a lot more for health coverage -- or getting a plan that doesn't offer the benefits you want or need.

Of course, in addition to the aforementioned factors, you'll want to consider housing costs (including property taxes) and the general cost of living when you make your decision. Do a lot of research to determine which locale is best for you -- the state you retire in could shape your financial picture for better or worse.