One of the benefits of retirement is the ability to live anywhere you want. Without a job to tie you down to a specific city, you're free to move about the country, or even the world. You could move somewhere with nicer weather, or somewhere with a culture that resonates with you. Perhaps you'll choose your new hometown based on easy access to a big airport, so you can easily travel and visit your friends and family.
But one thing every retiree should keep in mind when planning to move to a new location is how much it costs to live there, including the amount you'll pay in taxes. There are 13 states that don't tax any of your retirement income -- your Social Security, retirement account withdrawals, or a pension if you have one. And they're arguably the best states for retirees to move to in 2024.
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The 13 states that don't tax retirement income
Of the 13 states that don't tax retirement income, there are eight that don't have any income tax at all:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
New Hampshire only taxes interest and dividend income. Any retirement account withdrawals, pensions, Social Security income, or capital gains don't incur any tax at all.
It's important to note that while these states don't charge any income tax, you may find your property tax bill is significantly higher (like in New Hampshire or Texas) or you're paying much more in sales tax (as in Tennessee, Washington, or Nevada). So, if you plan on buying an expensive house or you'll be spending a lot, be sure to do your research.
Beyond the states with no income taxes, four states specifically exclude retirement income from taxation. That includes income from retirement account withdrawals, employer pensions, and Social Security income. Those states are:
- Illinois
- Iowa
- Mississippi
- Pennsylvania
There are a few caveats for these states. In Iowa, retirees must be at least 55 years old or disabled to exclude retirement income from their taxes. In Pennsylvania, annuity income that's not part of an employer-sponsored plan is subject to taxation.
Again, be sure to look at the big picture when it comes to taxation. Property taxes in Illinois and Iowa are some of the highest in the country. Illinois charges a hefty sales tax, too.
Make the most of your retirement
It's important to note that taxes are just one factor to consider in retirement. What's more, federal taxes are unavoidable and are often a much bigger burden than state taxes on most forms of retirement income. So while lowering your state taxes is nice, it shouldn't be the sole determinant of where you retire.
You'll also want to consider the cost of living. Mississippi offers one of the lowest costs of living of any state in the country. You'll also find Iowa and Tennessee on many top-10 lists. Conversely, New Hampshire and Washington might not have high taxes, but the cost of living in either state is extremely high.
Overall, you should look to balance your potential tax bill and cost of living with how you picture spending your golden years. There's no point in living in a state with no retirement income taxes just to save money if you're going to be miserable. But being aware of the potential benefits of moving to one state or another could sway your decision if you're trying to choose from among multiple options.
