Saving for retirement is already a challenging task for many workers, and having to give a piece of their nest egg back to the government only puts a bigger financial burden on seniors. Certain strategies can help you keep more of your money, like keeping savings in Roth accounts that allow for tax-free retirement withdrawals. But where you retire matters too.

Currently, 13 states don't tax retirement withdrawals from 401(k)s or IRAs. Here's what you need to know about them.

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States that don't have any income tax

The following eight states don't tax the income of any of their residents:

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

New Hampshire will soon be joining this list. Right now, the only income tax its residents can face is on interest and dividend income above $2,400. But that's going away on Jan. 1, 2025.

Other states that don't tax retirement income

There are an additional four states that don't tax the retirement income of their seniors in most cases. They are:

  • Illinois: Distributions from retirement plans, including 401(k)s and IRAs, and Social Security income are exempt from the state's income tax.
  • Iowa: Residents over 55 don't pay taxes on their retirement account withdrawals as of 2023.
  • Mississippi: Retirement account withdrawals aren't taxable as long as you meet the plan requirements -- that is, you wait until you're at least 59 1/2 and, for Roth accounts, have had the account for at least five years before making the withdrawal.
  • Pennsylvania: Pennsylvania also doesn't tax retirement income as long as you meet plan requirements. Early withdrawals may be subject to taxation, though.

If you live in any of these states and have questions about how its retirement-income exemption works, contact your state department of taxation for more information.

Is moving to a state that doesn't tax retirement income worth it?

You may consider moving to a state that doesn't tax retirement income after you leave the workforce, especially if that state also doesn't tax Social Security benefits. But it's important to recognize that this may not always save you money.

States that don't have income taxes sometimes have higher sales or property taxes, so you could pay more to own your home or purchase everyday items than you have previously. You could also face a higher cost of living, depending on where you live now and where you plan to move to.

There are also non-financial factors to consider when debating a move in retirement, like the weather and proximity to family and friends. If you like where you live, it may not be worth it to move to another state even if it would save you money.

Those who are thinking about moving should compare the tax laws in their home state with their chosen retirement state to see how they compare. If necessary, consult a tax professional to get a detailed idea of how this move could affect your retirement income needs.