The most affordable states for retirees

If you’re planning for retirement, an uncertain economy, rising prices, and concerns about Social Security’s solvency can make an already important decision feel even harder. Still, the larger concern is clear: if current trends continue, these two safety net programs for older adults could run short of funds in the coming years, due in part to the country’s rapidly aging population. 

Without action, only 80% of Social Security benefits will be payable in 2035. Changes to the program could have major effects on older Americans because 87.8% of households led by older adults receive Social Security income. 

At the time of this analysis, inflation was high, and interest rates were rising. The sudden closures of Silicon Valley Bank and Signature Bank marked the largest bank failures since 2008.

These concerns aren’t limited to older adults. About 1 in 4 Americans have no retirement savings, which means affordability will likely be the single biggest factor in deciding where they retire. In general, older adults need enough retirement income to cover living expenses while still enjoying their retirement years. 

Larger cities and in-demand areas tend to have a higher cost of living, while rural areas and smaller cities may be more affordable. You can find more affordable communities in every state, but each offers something different based on its location, climate, proximity to friends and family, and other factors. 

For retirees and people approaching retirement, it’s especially important to consider a range of financial factors before deciding where to settle. 

To support that decision, this analysis examined eight financial metrics using the most recent federal data available. The metrics span health care costs, cost of living, retirement income, taxes, and poverty rates among older adults. Given the economic climate, the analysis focuses strictly on financial factors and doesn’t include lifestyle data. 

Key findings 

• The Mountain State region is the most affordable for retirees, with Wyoming, Utah, Montana, Idaho, Colorado, and New Mexico all ranking among the top 10 states overall. 

• Six of the 10 most affordable states have costs of living that are slightly above average, but they make up for it with lower Medicare spending per beneficiary, home utility costs, and poverty rates among older adults. 

• Seven of the 10 least affordable states for older adults are on the East Coast, and the other three are Hawaii, Texas, and California. 

Best and worst states 

Wyoming is the country’s most affordable state for retirees, supported by its lower cost of living, lower Medicare costs, and low poverty rate among older adults. In addition, most older homeowners spend less than 30% of their income on housing. 

Half of the top 10 states, Wyoming, Idaho, Colorado, Delaware, and Tennessee, are considered especially tax-friendly for retirees, according to a Kiplinger analysis that considers taxes on income, sales, property, gasoline, cigarettes, and other factors. 

By comparison, the Northeast and West Coast are the least affordable regions for older adults on a budget, with Massachusetts, New York, Connecticut, New Jersey, and California rounding out the bottom five. 

That’s largely due to higher living costs, residential utility bills, and other housing expenses. In Connecticut, for example, 1 in 3 older homeowners spend more than 30% of their income on housing. 

Florida’s surprising result 

Although Florida has a reputation as a haven for retirees, it ranks 43rd overall. That position is largely due to its high annual Medicare spending level of $13,652 per beneficiary, costly monthly utilities, and an 11% poverty rate among older adults. 

That said, the Sunshine State is considered fairly tax-friendly for retirees. In a study that included weather and lifestyle, Florida would likely rank higher. 

State-level data in each category, including Washington, D.C.

Cost of living compared with income 

If you’re deciding where to retire, the relationship between cost of living and retirement income can significantly affect your quality of life. In general, older adults will want to maximize retirement income, which depends on savings, pensions, and Social Security benefits, while minimizing living expenses to support a comfortable retirement. 

While states with lower living costs also tend to have lower retirement incomes, Georgia may offer a sweet spot. It has one of the lowest costs of living in the U.S., with an index score of 88.6, but its average retirement income of $32,614 is above the national average of $31,631. It’s also considered relatively tax-friendly for retirees. 

The cost of living is lowest in Mississippi, ranked 22nd overall, Oklahoma, ranked 27th, Kansas, ranked 26th, and Alabama, ranked 16th. It’s highest in Hawaii, ranked 44th, Washington, D.C., ranked 42nd, Massachusetts, ranked 51st, California, ranked 47th, and New York, ranked 50th. 

Medical costs 

Health care is another major consideration when deciding where to retire. You may need to weigh access to your preferred doctors and medical services alongside the costs. Health care is the biggest annual expense for older adults apart from housing and transportation. Although most older adults have coverage through Medicare, they still face out-of-pocket costs for services Medicare doesn’t cover, including long-term care and dental services. Those medical bills can add up. 

Across the U.S., Medicare spends an average of $12,271 per beneficiary each year, a level that’s expected to increase in the coming years. Medicare spending per person is highest in the three most populous states: Florida at $13,652, California at $13,564, and Texas at $13,458. It’s lowest in Vermont at $8,726, Montana at $9,338, and New Mexico at $9,796. These are government costs, but they suggest that older adults face out-of-pocket costs in similar proportions. 

For older adults who want to remain at home as they age, a home health aide costs an average of $61,776 per year. That annual cost ranges from $42,900 in West Virginia to $82,940 in Minnesota, according to our Cost of Care data. Even states that are relatively affordable overall, such as Colorado, ranked sixth, can be expensive for home health care, at $76,648 annually. In Louisiana, which ranks 40th overall, home health aides cost an average of $44,616 per year, making it more affordable than every state except West Virginia. 

Conclusion 

As you decide where to retire, consider your own needs and priorities. These may include affordability, weather, proximity to friends and family, access to health care and amenities, safety, cultural connections, and transportation. Carefully researching these factors can help you make the most of your retirement income, manage living expenses, and choose a community that suits you. 

Methodology 

This analysis used the most recent available data for eight metrics to determine the most affordable states for retirees. A Z-score distribution scaled each metric relative to the mean across all 50 states and Washington, D.C., with outliers capped at 3. Some Z-scores were multiplied by -1 because a higher score was negatively associated with being above the national average. Each state’s overall ranking was calculated using its average Z-score across the eight metrics. Here’s a closer look at the metrics used: 

• Cost of living index score, 2022: Missouri Economic Research and Information Center) 

• Average Medicare spending on personal health care per beneficiary, 2020: Centers for Medicare and Medicaid Services) 

• Annual median cost for a home health aide, 2021: Genworth Financial) 

• Share of homeowners age 65 and older who spend less than 30% of their income on housing, 2021: Census Bureau) 

• Average monthly home electricity bill, 2021: Energy Information Administration) 

• Average retirement income among adults age 65 and older, 2021: Census Bureau) 

• Tax-friendliness rating for retirees, converted to a score from 1 to 5, 2022: Kiplinger) 

• Poverty rate among adults age 65 and older, 2021: Census Bureau)