The 10 Best and Worst States for Retirement Savings
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Rising costs and stagnant wage growth have more people considering moving to locations with more affordable living expenses. Inflation ticked up to 6.5% to close out 2022, peaking at 9.1% in June 2022. The Congressional Budget Office predicts PCE inflation will drop to 3.3% in 2023 and 2.4% in 2024. Those numbers offer some relief, but they are stacked on record high inflation, and these are still higher inflation readings than usual.
Inflation is relative, and if you feel as if your expenses jumped by more than 6.5% in 2022, you’re not alone. Miami, New York City, and Boston experienced annual rent growth rates of 38.9%, 30.4%, and 27.3%, respectively. Miami is the leader of the pack, but the city reflects a growing trend in Florida. The Sunshine State was once seen as a desirable location for retirees. The weather hasn’t changed, but the elevated cost of living has made it less manageable for people who want to stretch out their savings.
Housing isn’t the only expense that has seen a big jump throughout the country. The CPI found that food prices increased by 10.1% from 2022 to 2023. Gas prices jumped by 49% from January 2022 to June 2022. Interest rates are also soaring, making it more difficult for aspiring homeowners and people who got variable rates on their mortgages.
At the same time, remote work has become more common. Some hybrid workers are moving out of cities to more affordable locations and embracing a new type of super commute. It’s becoming more common for people to fly to work or drive for several hours when needed. These trips are less frequent than a traditional work schedule, and many employers have been forgoing in-person work locations altogether.
Moving to a different location can help you save money, but which states make the most sense for your budget? This list will contain the best and worst states for people paying attention to their cost of living, work life, and desire to stretch their retirement funds.
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The Worst States for Retirement Savings
The best states on this list feature things to do and let you stretch your money. Most of the worst states for retirement savings offer many things to do, but their high living expenses and tax rates make them less manageable than other parts of the U.S.
10. Vermont
- Population: 7,080,262
- Average monthly rent: $1,156
- Income tax: No income tax
- State cost of living index: 90.2
Vermont is nicknamed the Green Mountain State, which tips people off to its wide selection of outdoor activities. Its median household income of $63,000 and average home price of $353,000 leaves much to be desired for retirees wanting to stretch their money. If you can afford the highest cost of living, you will find yourself in one of the safest states in the country. The winters are cold, but the state makes up for it with skiing, sledding, and other winter activities.
9. New Hampshire
- Population: 1,395,847
- Average monthly rent: $1,365
- Income tax: 5% flat rate (only dividend and interest income get taxed)
- State cost of living index: 116.1
New Hampshire continues the trend of northeastern states being among the least affordable. The state has mountains that provide plenty of outdoor activities throughout the year. The state has pretty lakeshores and a healthy mix of rural and urban areas. The state’s towns and urban centers have plenty of shopping for people who want new and antique items. The state has no sales or income tax (unless you have dividend or interest income), but housing prices and property taxes are high.
8. Connecticut
- Population: 3,615,499
- Average monthly rent: $1,559
- Income tax: 3% - 6.99%
- State cost of living index: 116.8
Connecticut is the 3rd smallest state in the United States and has a high cost of living. However, the small state has a lot to offer. A good job market and numerous outdoor activities give residents many options. The state has a few coastal towns that make for great weekend getaways. The Essex Steam Train is a popular attraction that combines an entertaining ride with the state's history. The steam train isn’t like your typical train and is a throwback to past train designs.
7. Oregon
- Population: 4,359,110
- Average monthly rent: $1,198
- Income tax: 4.75% - 9.9%
- State cost of living index: 121.2
Mountains, outdoor activities, and scenic views greet you throughout the Beaver State. Pioneers used the Oregon Trail to travel West to pursue new opportunities. The state gives you a look at the Pacific Ocean and has many rivers and beaches for you to explore. The Portland Japanese Garden and Thor’s Well are some of the must-see attractions in the state.
6. Maryland
- Population: 6,298,325
- Average monthly rent: $1,383
- Income tax: 2% - 5.75%
- State cost of living index: 124.0
Maryland is home to the nation’s capital, which means many historical landmarks. The state has a vast coastline which includes the Ocean City Boardwalk. It’s one of the most popular locations on Maryland’s coastlines, but there are other parts to explore. The state features several sports teams, such as the Baltimore Ravens, Baltimore Orioles, and Washington Wizards. Its location between the northern and southern parts of the U.S. makes it a melting pot of different cultures.
5. Alaska
- Population: 740,339
- Average monthly rent: $1,338
- Income tax: No income tax
- State cost of living index: 126.6
Alaska is an interesting state when it comes to the cost of living. On the one hand, it has no state income tax. You get to keep more of your 401k withdrawals because of this arrangement. However, Alaska features a high cost of living due to its proximity away from the continental United States. It takes longer for goods to arrive and is in limited supply. It has some of the best places to explore if you can get through the cold days. If you love being outdoors and can withstand cold temperatures, Alaska may be great for you. Temperatures are cold in the winter but moderate in the summer. You won’t have to worry about a hot and humid summer in Alaska.
4. New York
- Population: 20,448,194
- Average monthly rent: $1,280
- Income tax: 4% - 10.9%
- State cost of living index: 134.5
New York City can keep you busy for a lifetime. The city has incredible amenities and presents attractive career opportunities, but you will run out of money sooner if you retire in the city. While New York City gets most of the attention, Upstate NY has many mountains, lakes, and other outdoor activities. Upstate NY provides a more rural feel, and prices get more affordable as you move further away from NYC. New York has four seasons, and the winter’s temperature depends on which part of New York you live in. The city receives some snowfall each year, but it’s a common occurrence in Buffalo, New York, and other parts of the state near Canada’s border.
3. California
- Population: 40,223,504
- Average monthly rent: $1,668
- Income tax: 1% - 12.3%
- State cost of living index: 137.6
California has a lot going for it. Warm weather, plenty to do outdoors, and seemingly unlimited options greet you in the Golden State. This state has some of the country's best beaches, breathtaking views, and many cities. However, the state is notoriously expensive and is in the middle of a homelessness crisis. California has the highest homelessness rate in the United States (44 people per 10,000).
2. Massachusetts
- Population: 7,174,604
- Average monthly rent: $1,893
- Income tax: 5% flat rate
- State cost of living index: 149.7
Massachusetts is a historical state with many landmarks and relics of the country’s early days before the American Revolution. History buffs will enjoy the state, but there’s something for everyone. The state has many professional sports teams, top universities, and other perks. The state is also home to the oldest marathon in the United States. The first Boston Marathon took place in 1897, and it has continued each year ever since. The city and surrounding land have a lot of charm, but a high cost of living doesn’t make Boston the ideal destination for retirees hoping to get more mileage out of their savings.
1. Hawaii
- Population: 1,483,762
- Average monthly rent: $1,951
- Income tax: 1.4$ - 11%
- State cost of living index: 184.0
Hawaii has the highest cost of living among any U.S. state. Its far distance from the continental U.S. means higher grocery costs and other basic supplies. The island’s charm and breathtaking views also add to its demand. The state has many national parks and consists of several islands. Waikiki Beach in Oahu is one of the most popular destinations in Hawaii. Hawaii has a lot to offer, but its weather is superb. The state is sunny year-round, with daytime summer temperatures averaging 85 degrees and daytime winter temperatures averaging 78 degrees. The state’s high cost of living and limited options may not make it the best choice for retirees. Those plane tickets will quickly add up if you frequently need to visit the continental U.S. to travel or reconnect with loved ones. Hawaii has a lot of things going for it, but its high cost of living doesn’t make it the best fit for retirees looking to stretch out their savings.
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The 10 Best States for Retirement Savings
We focused on the state cost of living index for this analysis. A lower cost of living makes it easier to stretch your dollars. Each state has pockets of affordability and areas that are expensive. Average monthly rent payments come from Rent Data based on a 2-bedroom rental in 2023.
10. Tennessee
- Population: 7,080,262
- Average monthly rent: $1,156
- Income tax: No income tax
- State cost of living index: 90.2
Tennessee has plenty of natural beauty, with over 10,000 caves and caverns to explore. The state’s Great Smoky Mountains National Park welcomes more visitors annually than any other National Park in the United States. Nashville is the state’s capital and has become the focal point of country music. Winters are mild in the Volunteer State, and the effective property tax rate is low, at only 0.56%.
9. West Virginia
- Population: 1,775,932
- Average monthly rent: $738
- Income tax: 3% - 6.5%
- State cost of living index: 90.0
West Virginia is the only state entirely tucked within the Appalachian Mountain range. This geographic layout has earned West Virginia the nickname “The Mountain State.” The state also has over 1 million square feet of forests for residents and tourists to explore. West Virginia has a low cost of living, and they will pay you to live in the state. The Ascend WV Program pays incoming remote workers $12,000 to find a home in the state. It may be worth picking up a remote qualifying job in retirement to get the $12,000 payment. The Ascend WV website touts a $96,400 median home price.
8. Indiana
- Population: 6,876,047
- Average monthly rent: $912
- Income tax: 3.23% flat rate
- State cost of living index: 89.9
Indiana boasts an affordable cost of living, excellent universities, and a lower crime rate than average. Residents have over 24,000 miles of river and over 900 lakes to enjoy. They can also choose from three national parks. The Indy 500 is a leading event in the state that draws over 325,000 fans.
7. Iowa
- Population: 3,233,572
- Average monthly rent: $849
- Income tax: 0.33% - 8.53%
- State cost of living index: 89.2
You won’t have to worry about traffic congestion in The Hawkeye State. The state features many cornfields and gives a small-town vibe. The state has a growing economy and leads the nation in beef, pork, soybean, grain, and corn production. If you plan to play a lot of golf during retirement, this state is for you. It features more golf courses per capita than any other U.S. state.
6. Missouri
- Population: 6,204,710
- Average monthly rent: $818
- Income tax: 1.5% - 5.3%
- State cost of living index: 89.1
The midwest features many affordable locations for Americans looking to stretch their money. Missouri. The state has a strong barbecue scene and plenty of public transportation. The state also plays host to several festivals throughout the year. Missouri’s Lake of the Ozarks provides many choices for residents and tourists looking to get out and have something to do.
5. Georgia
- Population: 11,019,186
- Average monthly rent: $966
- Income tax: 1% - 5.75%
- State cost of living index: 88.6
The Peach State has a major metropolis that is cheaper than most U.S. cities. Atlanta has job opportunities and many choices for residents, but it’s far from the only thing Georgia has to offer. Moving away from the city will make you find a cheaper lifestyle. Georgia features mild winters and lower property tax rates than other states. You will also find many beaches and mountains throughout the state.
4. Alabama
- Population: 5,097,641
- Average monthly rent: $839
- Income tax: 2% - 5%
- State cost of living index: 88.1
Football is a big sport in Alabama because of its universities. The state’s barbecue is among the best in the nation, and the state has many outdoor activities for residents and tourists. You won’t have to worry about getting shuttered in the home too often during winter since they’re mild in Alabama. The state has a big music scene and was instrumental in rock and roll. Country music is also popular in Alabama.
3. Kansas
- Population: 2,963,308
- Average monthly rent: $836
- Income tax: 3.1% - 5.7%
- State cost of living index: 87.5
Kansas is a mostly flat state that provides all four seasons. The state offers a quieter pace of life and two major cities featuring affordable living. You can venture out of the cities and find 2,000-square-foot homes priced under $400,000. Depending on the location, investing $200,000 in a home can get you 1,200 to 1,500 square feet. Rush hour traffic isn’t a thing in Kansas. It’s easy to get where you need to go.
2. Oklahoma
- Population: 4,021,753
- Average monthly rent: $838
- Income tax: 0.25% - 4.75%
- State cost of living index: 85.8
Oklahoma features many entertainment options and country music for residents and tourists. Mountains, lakes, and state parks fill the state. Tulsa and Oklahoma City are the main metropolis attractions, but the state features many small towns that are more populated than your typical small town.
1. Mississippi
- Population: 2,959,473
- Average monthly rent: $816
- Income tax: 0% - 5%
- State cost of living index: 85.0
If you want the most mileage out of your money and great outdoor attractions, you may want to give Mississippi a closer look. Median home prices in the Magnolia State are 40% lower than the average median home prices in the U.S. The state also has mild winters for people who don’t want cold winters. Elvis Presley was born in Mississippi, and his home has become a popular museum. The Natchez Trace Parkway has a charming biking trail that stretches from Natchez, Mississippi, to Nashville.
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4 Tips for Saving for Retirement
Financial planners suggest saving a minimum of 10% to 15% of your income for retirement, although many are fans of the 50/30/20 Rule, which suggests 20% of your income should be placed into retirement funds. Here’s how.
1. Contribute to a 401(k)
Most of your retirement savings should go into a 401(k) or Roth IRA. Shoot for 15% of your income going into these accounts. If that feels too high at the moment, contribute the highest percentage that your company provides an employer match on, which can double your contributions.
2. Contribute to an IRA
If your workplace doesn’t offer a 401(k), enroll in an IRA, which is an individual retirement account that comes with tax benefits. A traditional IRA is similar to a 401k with tax-deferred contributions and is available to workers who do not have a 401k or IRA offered by an employer. A Roth Ira is also popular as it is supplemented with after-tax dollars, meaning when you retire, your money is yours, and you can enroll in a Roth even if you have an employer-sponsored IRA.
3. Budget
If you don’t know where your money is going, you won’t know how to save it. Create a budget and keep track of where your money goes. Be sure to include retirement savings and pay your savings as if you would pay a bill. Following the 50 30 20 Rule, 50% of your expenses should go toward bills and expenses, 20% towards savings, and 30% towards discretionary spending. By budgeting, you can spot if your bills and expenses are higher and prevent you from reaching your 20% goals. Make adjustments as needed.
4. Reduce your debt
If you have debts with high interest rates, paying these off before you save may be beneficial. With a credit card carrying a 24% interest rate versus a high-interest savings account offering 2% interest, it makes sense to stop paying interest on balances. Use your budget to plan a pay-off schedule. Some debt payoff strategies include the snowball method, where you pay off your smallest debt first, then put the money that would have gone into paying that debt into the next debt, and so on and so on, like a snowball rolling down a hill and getting larger and larger with momentum.
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Writer
Marc Guberti is a business freelance writer who specializes in personal finance, digital marketing, and entrepreneurship. His award-winning book "Content Marketing Secrets" teaches readers how to create, promote and optimize content for growth and revenue. Marc also hosts the "Breakthrough Success Podcast," where listeners learn how to master content marketing and get more clients.
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