There are many desirable locations you could choose to retire as we described in the first half of this article series, The 10 Best States for Retirement. These areas offer quality healthcare, natural wonders, and affordable living. However, it can also be useful to consider the worst locations for retirees – and start preparing for the downsides of these states if you choose to retire there.
The cost of living in a particular state can be instrumental to determining if your retirement plan will be a success. However, costs aren’t everything. You will also need to consider your interests, hobbies, and overall welfare. The following ten states have significant hurdles for retirees to overcome in at least one of these areas.
10 Worst States for Retirement
As with the development of our list for the 10 best states for retirement, we acknowledge the subjectivity of this process. So, to keep things consistent, we used the same key factors to identify the 10 worst states for retirees.
- Factors that we considered include:
- Cost of Living
- Tax Rates
- Crime Rates
- Healthcare Quality / Availability
- Local Culture & Amenities
- Climate
#10 California
While California living seems desirable, the Golden State will be among the most expensive for retirees. Retirement income is fully taxed – with an exception for Social Security benefits – and the Golden State has the highest income tax nationally.
High taxes, lofty housing costs, and high sales taxes are some of the many factors that make California a financially challenging place to live for retirees. In fact, 1 in 10 seniors is living in poverty in California.
In addition to a high cost of living, safety is also a concern if you plan to retire in California. Recent data identifies California’s crime rate as 31% higher than the national average and an astounding 59% of violent crimes go unsolved.
On the other hand, California ranks impressively for public health, which could be enticing to retirees who are not concerned with the high costs of living. Additionally, California boasts more than enough entertainment amenities and natural wonders to keep retirees active.
#9 New Mexico
In New Mexico, residents will find a temperate climate along with an inviting and colorful Southwest culture. Despite this wonderful environment, the Land of Enchantment generally is an unwealthy state, with 17.7 % of the population living below the poverty line.
With a high poverty rate, generally comes a high violent crime rate. This relationship holds true in New Mexico, as the state has a violent crime rate that is more than double the national average.
Retirees looking to settle in New Mexico will find a low cost of living, but they can also expect to pay retirement income tax – even on Social Security benefits. Healthcare is another downside to retirement in this state as it ranks in the bottom half of states in public health, which can disproportionately impact retirees.
#8 West Virginia
The Mountain State is mostly rural and offers a moderate climate, scenic views, and rocky terrain with plenty of nature to explore, but it might not be a top destination for retirees. Residents will find that their retirement income is taxed, and with poor state fiscal health, it is unlikely this will change anytime soon.
While West Virginia has experienced a decrease in crime, some areas of the state maintain a dangerous reputation for violent crime. Additionally, the population tends to be less healthy, which is evidenced by poor patient outcomes in health care. The state also ranks 4th worst for poverty. West Virginia’s weakness in these areas make it an unappealing retirement destination for most seniors.
#7 Louisiana
Known as the Pelican State, Creole State, and Sugar State, you will certainly find amazing cuisine in Louisiana. The moderate climate and hot, humid summers make outdoor dining a possibility year-round. Aside from creole fare, you will find a low cost of living combined with low income tax.
While Social Security retirement benefits and income from retirement pensions are not taxed at the state level, income from certain retirement savings accounts is taxable. In addition, residents will pay sales tax up to 11.45% in some areas.
High sales tax is not the only concern for retirees living in Louisiana. Safety and healthcare are also hurdles to a comfortable retirement. Louisianans experience a crime rate 65% above the national average. The health of the population also ranks poorly compared to other states, with high rates of obesity, smoking, and mental distress. Retirees will find limited access to geriatric care, which could present challenges during retirement.
#6 Alaska
The Last Frontier holds the smallest population of seniors in the United States. Having a cold climate with long and dark winter days, Alaska ranks as the worst climate in the country for retirees. The state is generally quite rural with crime per capita nearly double the national average.
Although Alaska is one of nine states that do not tax retirement income plans, residents will find a high cost of living, mostly due to the added shipping charges required to obtain goods from the mainland. The most notable payoffs for living in Alaska are no state sales tax, no state income tax, and a stipend from the state’s oil wealth savings account for qualifying residents.
#5 Connecticut
Offering a small-town feel, New England charm, and a generally temperate climate, Connecticut might be thought of as one of the safest and charming locations for retirement. Once you move beyond the quaintness, however, you will find little to promote the wellness and welfare of the resident retirees. In addition, the frigid winters that highlight New England living are rarely seen as a positive.
Connecticut is known to be among the unfriendliest states for retirees, with high real estate taxes and taxation of retirement income. In fact, when considering combined sales and income tax, Connecticut has the fifth highest tax burden of any state. Social Security income is partially taxed with withdrawals from retirement accounts being fully taxed. If you are planning to retire in Connecticut, be sure to consult a financial planner to navigate the complex tax situation.
#4 New Jersey
Known for greenery, shopping, restaurants, casinos, and golf, the Garden State is better fitted for a possible vacation spot than a retirement destination. New Jersey residents experience among the highest cost of living in the country, with retiree health costs ranking third highest.
The state also ranks poorly in fiscal soundness, with pension funding issues and little room for the tax situation to improve. On the bright side, Social Security is not taxed at the state level.
Although crime rates are relatively low statewide, there are pockets of the state that rank among the most dangerous in the nation. Those living in New Jersey experience overcrowding, heavy traffic, and brutal winters, leaving this spot as one of our least favorite for retirement living.
#3 Rhode Island
In the Ocean State, you will be met with above average living costs, accompanied by high taxes. Given that the state is not in the best financial shape, it is unlikely that the tax situation will change any time soon, leaving retirees paying partial taxes on Social Security income and full taxes on withdrawals from retirement accounts.
Healthcare in Rhode Island is rated as mediocre, which can be less than desirable to an aging resident. Rhode Islanders also will experience humid summers, bitterly cold winters, risk of flooding, and exposure to hurricanes given the proximity to the Atlantic Coast. If you can put those things aside, you will find ample beach access, delicious seafood, and rich history.
#2 New York
With New York City consistently ranked among the most expensive places to live in the United States, retirement in the Empire State can present some challenges. Residents will find some of the highest state and local taxes in the country, coupled with outrageous housing costs. These factors make the state too costly for many seniors.
City living is a bonus for the state that hosts the Big Apple, but the fast-paced life may not be desirable for most retirees. One can always choose to retire in rural New York, however many cities within the state are plagued with high costs of living, low employment rates, and high crime rates.
While summers are often warm, winters can be harsh, leaving little to do in the way of outdoor activities for a significant portion of the year. If your wealth allows it, spending summers in New England can be fantastic, but there is a reason why many of New York’s wealthiest opt for the warm air of Florida during the winter.
#1 Illinois
Although Illinois is often thought of as a cultural hotspot, with suburban living and wine trails to enjoy, this state has significant long-term debts, unfunded pension liabilities, and big budget imbalances. These complications make Illinois our pick as the worst state for retirees.
The Prairie State’s high taxes on property, along with steep state and local taxes are seen as unaffordable and unfriendly to many retirees. Additionally, the population trends toward unhealthy, with health care costs for retired couples coming in higher than the national average.
Illinois residents experience frigid winters which make outdoor living a challenge during a large part of the year. Finally, safety in Illinois has improved in recent years, but there are still a troubling number of violent crimes per capita. Despite hosting one of the Midwest’s most renowned cities, Chicago, the combination of budget issues, crime, climate and lagging public health make Illinois our #1 worst state for retirees.
How does our home state of Alabama stack up?
In our rankings, Alabama holds the #17 spot for retirement – well above average. Below you’ll find details of how Alabama ranked against the other states in the 6 categories we evaluated.
- Cost of Living: Alabama has a low cost of living and notably low housing costs. However, transportation costs are typically high due to a lack of public transit.
- Tax Rates: Alabama has a state income tax, but Social Security benefits and pension income are exempt from taxation. These exceptions are a boon for retirees hoping to keep their tax burden manageable.
- Healthcare Quality / Availability: Healthcare is a weakness for Alabama, which was a significant factor in our state’s ranking. Costs for healthcare are moderate compared to the national average, but there are fewer healthcare options for many residents, particularly those in rural areas.
- Local Culture & Amenities: Our rankings place Alabama in the top 20% of states for amenities including the beautiful Alabama Coastline, Appalachian Foothills, plentiful lakes and parks, award winning culinary scene, the Robert Trent Jones Golf Trail, Talladega Superspeedway, and champion college football teams.
- Climate: The climate in Alabama is another strength for our state. Residents of Alabama typically experience all four seasons, which is a major benefit. Mild winters allow outdoor activities year-round, but the occasional snow day is not unheard-of. The climate varies depending on your location within the state, so whatever type of weather you prefer, there is likely a spot in Alabama that meets your needs.
- Crime Rates: A major weakness for Alabama in our rankings was the crime rate. Alabama has a violent crime rate 7% above the national average.
Plan for A Comfortable Retirement with Meld Financial
If you choose any of the 10 Worst States for Retirement, it is especially important to have a comprehensive financial plan to overcome the obstacles these states introduce. At Meld Financial, our team of tax, legal, and investment professionals can help you create this plan and minimize the impacts of high living costs and high taxes.
We will develop your Financial Fingerprint® – a comprehensive wealth management plan that considers the most important aspects of your financial life, including location-specific hurdles. With your Financial Fingerprint® and our experienced team on your side, you can turn your retirement dreams into a reality. Contact us today to get started.
All 50 States, Ranked
We hope you’ve enjoyed our ranking of the best and worst states for retirees. If your state wasn’t mentioned and you are curious how it fared, take a look at our full 50 state rankings:
- 50. Illinois
- 49. California
- 48. New York
- 47. Rhode Island
- 46. New Jersey
- 45. Connecticut
- 44. Alaska
- 43. Louisiana
- 42. West Virginia
- 41. New Mexico
- 40. North Dakota
- 39. Arkansas
- 38. Kentucky
- 37. Mississippi
- 36. Maryland
- 35. Oregon
- 34. Oklahoma
- 33. Vermont
- 32. Nevada
- 31. Indiana
- 30. Maine
- 29. Washington
- 28. Kansas
- 27. Missouri
- 26. Minnesota
- 25. Hawaii
- 24. Massachusetts
- 23. Wisconsin
- 22. Delaware
- 21. Wyoming
- 20. Michigan
- 19. South Carolina
- 18. Iowa
- 17. Alabama
- 16. Colorado
- 15. Nebraska
- 14. Ohio
- 13. Montana
- 12. Virginia
- 11. Utah
- 10. Pennsylvania
- 9. South Dakota
- 8. Idaho
- 7. Georgia
- 6. New Hampshire
- 5. Tennessee
- 4. Arizona
- 3. Texas
- 2. North Carolina
- 1. Florida
