Where to Retire in 2026: Which State Fits Your Budget?
The state you retire in can save — or cost — you $5,000 to $20,000 per year in income taxes alone, and the cost-of-living spread between the cheapest and most expensive states exceeds 30%. The interactive calculator below translates your specific numbers into a state-by-state portfolio withdrawal rate, so you can see the real financial difference before you move.
A Florida retiree drawing $50,000/year from a traditional IRA pays zero state income tax. The same retiree in Oregon owes up to $4,375/year in state tax on that same withdrawal. Over a 25-year retirement, that gap equals $109,000 — enough to fund three years of additional spending. And that's before accounting for cost of living: a $6,000/month budget in Tennessee buys about the same as $7,000/month in California after adjusting for regional price differences.
The calculator below combines both effects — state income tax rules and cost of living — into a single number that matters: your annual portfolio withdrawal rate in each state. Start with your numbers, then work through the framework and state profiles below.
Retirement State Budget Fit Calculator — 2026
Compare states by your withdrawal rate
Enter your household numbers. The calculator adjusts spending for each state's cost of living, estimates state income tax on your IRA withdrawals (not Social Security), and shows how much of your portfolio you'd need to tap annually in each state.
Annual portfolio withdrawal rate by state
Green <4%Yellow 4–5%Red >5%
| State | Tax treatment | COL† | Adj. spend/yr | State tax/yr | Portfolio need/yr | Withdrawal rate |
|---|
The five factors that determine the right retirement state
1. State income taxes on retirement income
Nine states have no income tax at all: Florida, Texas, Tennessee, Nevada, South Dakota, Wyoming, Alaska, New Hampshire, and Washington. Five more exempt pension and IRA income: Pennsylvania, Mississippi, Illinois, Iowa, and Michigan. If all else is equal, starting with these 14 states as your shortlist is sensible — see the full breakdown in our state income taxes on retirement income guide.
2. Cost of living
The BEA Regional Price Parities show a 35-point spread between Mississippi (86) and Hawaii (121) — meaning your retirement dollar buys about 40% more in Mississippi than Hawaii. Even within popular retirement states, the spread matters: Tennessee's COL of 91 vs. Nevada's 103.5 means a $72,000/year budget in Tennessee delivers the lifestyle equivalent of $81,600 in Nevada.
3. Property taxes and homeowner costs
No-income-tax states often make up revenue with property taxes. New Hampshire (no income tax) has effective property tax rates exceeding 1.7%, meaning a $400,000 home costs $6,800+/year in property tax. Texas has no income tax but some of the highest property tax rates in the nation. Florida's homestead exemption softens the blow for full-time residents. Property tax can offset $3,000–$8,000 of apparent income tax savings.
4. Healthcare access and quality
Medicare Part B is priced nationally — your base premium is $202.90/month regardless of state. But specialist access, hospital star ratings (CMS), and supplemental insurance premiums vary significantly. Rural Tennessee and Mississippi offer excellent tax value but limited Level I trauma center access. Florida, Georgia, and Arizona have dense medical infrastructure for a retirement population, which matters more as you age.
5. Estate taxes and death taxes
The OBBBA permanently fixed the federal estate exemption at $15M per person — so federal estate tax affects almost no retirees.1 However, 12 states still impose their own estate taxes with much lower thresholds: Massachusetts and Oregon start at $1M, which catches many retirees with a home, IRA, and life insurance. If your estate exceeds $2M, check your target state's estate tax before deciding.
6. Lifestyle fit and proximity to family
Financial models optimize taxes; people choose where they actually want to live. The highest-leverage relocation for your retirement budget isn't always the one you'll be happy with in year 10. A realistic plan weighs grandchild proximity, walkability, airport access, climate preferences, and civic culture alongside the financial metrics — then asks an advisor to model the tax implications of the 2–3 states that genuinely appeal to you.
State profiles: top retirement destinations in 2026
Florida
No income taxCOL: avgThe default retirement state for a reason: zero income tax on IRA withdrawals, no estate tax, Medicare Advantage competition keeps supplemental premiums competitive. Homeowner insurance costs have risen sharply post-2021 in coastal counties — inland areas (The Villages, Ocala, Jacksonville suburbs) avoid the worst of it.
Tennessee
No income taxLow COLTennessee often wins the overall retirement value comparison: no income tax, cost of living 9% below the national average, and no estate tax. Nashville and Chattanooga offer strong medical infrastructure (Vanderbilt, Erlanger Level I trauma). The state sales tax (9.75%) is the highest in the nation and falls on groceries — factor that into the budget math.
Georgia
Large exemptionCOL: slightly below avgGeorgia's $65,000 per-person retirement income exemption means a 65+ couple can exclude $130,000/year in IRA and pension income from state tax, paying 4.99% only on the excess. Social Security is exempt on top of that. For a couple drawing $150K/year total with $50K in SS, they owe tax on just $20K — about $998/year — while enjoying Atlanta's world-class Emory/Piedmont hospital network and Hartsfield-Jackson airport access.
Arizona
2.5% flatCOL: near avgArizona's 2.5% flat tax is the lowest of any state that actually levies income tax. SS is exempt at state level. On $60K in IRA withdrawals, you owe $1,500/year — less than the property tax savings vs. Texas. Banner and Mayo health systems provide strong specialist access. Phoenix metro cost of living has risen toward the national average, but Tucson and Prescott remain cheaper. The dry climate benefits retirees with joint issues or respiratory conditions.
North Carolina
3.99% flatLow COLNC's 3.99% flat rate (phasing toward 2.49% in future years if revenue targets are met) applies to IRA withdrawals, but SS is fully exempt. A retiree drawing $60K from an IRA pays $2,394/year in state tax — lower than most states and offset by cost of living 6% below average. Asheville offers a walkable mountain retirement; Wilmington provides coastal access; Raleigh/Chapel Hill offer UNC Health's medical network and Triangle culture at suburban cost of living.
South Carolina
$15K exemptLow COLSC's 6.2% top rate sounds high, but the $15K retirement income exemption per person plus SS exemption means a couple drawing $60K/year ($30K each from IRA) pays state tax only on $30K — $1,860/year combined. Cost of living 8.5% below average helps further. Greenville's booming Prisma Health system, Hilton Head coastal access, and the Lowcountry lifestyle make SC one of the most complete retirement packages in the Southeast.
States to approach carefully for retirement
California: COL index ~114, state income tax up to 13.3% on IRA distributions, no exemption on retirement income. A retiree drawing $80,000 from a traditional IRA could owe $6,500–$9,000/year in CA state income tax (depending on total income). California also imposes a 1.3% mental health services surtax on income over $1M. For retirees with large RMD-driven income, the combined federal + state tax rate on the last dollar of withdrawal can exceed 40%. One major offset: Medi-Cal provides exceptional long-term care benefits for low-income Californians.
Oregon: COL ~107, income tax 8.75–9.9%, no retirement income exemptions, and a $1M estate tax threshold. Oregon doesn't tax Social Security, but IRA and pension income is fully taxed at the same rate as wages. A $100,000 IRA withdrawal could generate $8,750 in state income tax. Estate tax at a $1M threshold means many retirees with modest IRAs and a paid-off home could face an Oregon estate tax bill their heirs weren't expecting.
Minnesota: COL ~103, income tax up to 9.85%, and Minnesota taxes Social Security for incomes above $78,000 (MFJ).3 One of only 8 states that still taxes Social Security benefits. Retirees with combined income above the threshold face both SS taxation and a high marginal rate on IRA withdrawals.
The relocation planning checklist
- Establish domicile correctly. Spending winters in Florida doesn't automatically make you a Florida resident for tax purposes. You typically need: Florida driver's license, Declaration of Domicile filed in your county, updated voter registration, and intent to remain indefinitely. Your prior state (especially CA, NY, IL) may audit the change if you leave during a high-income year.
- Time the move around income events. If you're planning a large Roth conversion, a home sale, or a year with elevated RMDs, moving to the low-tax state before that income hits can save a meaningful amount. Even Q4 vs. Q1 timing shifts how the income is split across states.
- Update Medicare plans for the new state. Part D drug plans are state-specific. Medicare Advantage networks are local. Re-enroll during the Annual Enrollment Period (Oct 15–Dec 7) in the year you move. Review your Medigap plan options — guaranteed-issue rights may apply if you're within 63 days of losing other coverage.
- Review estate documents. Wills, trusts, and powers of attorney are governed by state law. A document drafted in California may need updating to reflect Florida or Tennessee legal requirements. Beneficiary designations (which override wills) should be reviewed and confirmed regardless.
- Check state-specific estate tax exposure. If you're moving from Oregon or Massachusetts, moving out before death avoids those states' estate taxes on non-real-estate assets. Real estate in those states is still subject to their estate tax regardless of your domicile.
- Model your full tax picture. A retirement advisor can run projections for your 2–3 target states using your actual income mix — SS + IRA + Roth + pension + rental income — across 10 years, factoring in RMD growth, IRMAA tiers, and planned Roth conversions. The difference often isn't what you'd expect from headline tax rates alone.
Sources
- IRS Estate Tax — IRS.gov. Federal exemption $15M/person (OBBBA, July 2025, permanent).
- NC Income Tax Rate Schedules — NC Department of Revenue. 3.99% flat rate effective January 1, 2026.
- Social Security Income — Minnesota Department of Revenue. SS taxed above $78,000 MFJ threshold.
- State Individual Income Tax Rates and Brackets 2026 — Tax Foundation. State flat rates and schedules.
- Regional Price Parities by State 2023 — Bureau of Economic Analysis. Cost-of-living indices used in calculator.
- Georgia HB 463 Tax Rate Update — Georgia Governor's Office. 4.99% flat rate for 2026; $65K retirement exclusion for age 65+.
State tax information verified June 2026 against state department of revenue websites, Tax Foundation 2026 data, and official legislative records. Cost-of-living indices from BEA Regional Price Parities 2023 (most recent available). Property tax estimates from Tax Foundation and Lincoln Institute of Land Policy.
Get matched with a retirement income advisor
A retirement specialist can model your specific income mix — Social Security, IRA withdrawals, Roth conversions, pensions — across your target states and find the optimal sequence for your relocation. Fee-only advisors only. No products sold.