The 7 Worst States to Retire In

High Taxes Make These States Unfriendly to Retirees

Do You Know When to Retire?
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Looking for a place to retire? You might want to steer clear of these states. Although each state on our list has plenty of positive selling points, other states may be a better fit for retirees looking to relocate.

Here we provide a breakdown of the seven worst states for your retirement if you're looking for your pension to go as far as possible. Instead, you might want to consider choosing from among the best states for retirees.

West Virginia

Although you’ll meet some incredible people in West Virginia, you won’t find the state scoring high on very many “best of” lists when it comes to retirement. Most retirement income, including Social Security, is taxed after the first $8,000. Additionally, the median household income for individuals 65 years and older was just $35,779 in 2018, which places it near the bottom of states.

Alaska

If reality TV is any guide, America is fascinated with Alaska—but not as a place to grow old. The harsh conditions and high cost of living (28% above the national average in 2020) make this a difficult place to retire for most people over the age of 65 and living on a fixed income.

Despite this not being a great place to retire overall in terms of the financial side, there’s plenty of reasons why Alaska isn’t as bad as it sounds. It has no state income or sales tax, offers an annual dividend check to its citizens from the state’s oil well savings (the Alaska Permanent Fund paid out $1,606 in 2019), and, of course, it promises absolutely beautiful scenery.

Oregon

No sales tax, over 300 miles of beautiful coastline, the most bike-friendly city in the country in Portland, a low crime rate, farmers' markets everywhere, and beautiful weather—what’s not to like about Oregon? The 9.9% top income tax rate for one. Also, the state has a high cost of living, coming in at 34% above the national average in 2020.

Minnesota

Some people like snow, but you may get sick of it in the Gopher State, with anywhere between 36 to 70 inches of snow falling annually depending on where in the state you live. But you won't just struggle with the weather: Minnesota's living expenses and median household income are about average, but the state taxes Social Security benefits along with almost all other retirement income including military, government, and private pensions. Add to that the high state sales and income tax, and you can see why Minnesota might not be high on your list. On the other hand, it is the “land of 10,000 lakes." Want waterfront property? No problem.

Kentucky

Unfortunately, Kentucky is either at the top or near the top of worst places to retire, including ours. Kentucky's poverty rate hovers at around 17%, which is close to the bottom in the nation. Also, Kentucky nursing homes have performed poorly, with one report finding that 43% of the state's 284 nursing homes were rated "below average."

On the other hand, the cost of living is low and the state didn't tax the first $31,110 of retirement income in tax year 2019 (and doesn’t tax Social Security at all). And, of course, it's the birthplace of bourbon. That has to count for something.

Montana

You won’t have any trouble finding beautiful views in Montana, but holding onto your money might be a challenge. While the cost of living in the state fell slightly below the national average in 2020, median household retirement income is far below the average state. Additionally, Montana will tax most of your retirement income including a top tax rate of 6.9%—and that's not just for the filthy rich, it's for anyone earning $18,400 or above in 2019.

New Mexico

Most of the states on our list have been in the northern portions of the country but there are some steer-clear states in the southern half as well. Leading that charge is New Mexico, where at least 15% of people ages 65 and older live in poverty in the state. The tax on Social Security benefits and most other retirement income certainly doesn't help, although low-income seniors can receive an $8,000 exemption. On the bright side, health care costs are below average along with the cost of living.

The Bottom Line

While these seven states may have their downsides, it's important to keep in mind that your individual situation should matter a lot more in making a determination on where to settle down in retirement. For example, even if you don't like paying a high state tax, perhaps you can afford it and found a great deal on a house in Oregon near your family. In a case like that, it doesn't make sense to move to a completely different state you aren't interested in just to save a few bucks. So take the time to do your research, and you'll be content no matter your decision.