Best states to retire

The 10 best states to retire in

1. Tennessee
2. Texas
3. Louisiana
4. Mississippi
5. Alabama
6. Arkansas
7. Florida
8. Oklahoma
9. Georgia
10. Nevada

Methodology

Income tax
States that don’t have an income tax are triple winners, because they also get a point for not taxing Social Security or pensions. Most states have exemptions for very low income earners for people over 65. Others have fairly low or high thresholds before income is taxed. Tennessee has a flat tax of 5%, other states have progressive rates based on income.

Social Security
It is no surprise that none of TopRetirements.com’s top 10 states do not tax Social Security benefits, which supplies the bulk of most retirees' income.

Taxation of pensions
This is one of the most complex areas for retirees to understand. Most of TopRetirements.com’s top 10 states exempt all or most pensions. Some states exempt in-state, military, or federal pensions – but not private or out of state pensions. If you will receive a sizable pension, you should check before you move.

Property taxes
TopRetirements.com used data from the Tax Foundation to develop its list. The 15 states with the lowest property taxes per capita got a positive point, the highest 10 states got a negative point.
Cost of living: TopRetirements.com used data from MissouriEconomy.org, awarding a positive point for being in the lowest 15 states, and a negative point for being in the 10 states with the highest cost of living.

Climate
States in or contiguous to the Sunbelt received a positive point.

Health-care insurance costs
HVS Financial provided the state-by-state cost of health insurance premiums. Their data estimated premium cost for a couple currently 65 years old, both of whom live to age 85. Premium includes Part B, D, and Medigap insurance. Although there are not tremendous differences between most states over this 20-year period, the top and the bottom are different. Hawaii is the lowest with a total cost of $271,284, and New Jersey is the most expensive at $362,844. Florida was second most expensive, at $362,544. TopRetirements.com awarded 0.25 points to the 15 states with the lowest premiums, and a negative 0.25 points to the 10 highest states.
Health-care insurance costs are an example of yet another factor to take in consideration if you are shopping for a retirement state. And, if you are not currently covered by an employer, COBRA, or Medicare, health-care costs can be wildly different. Some states allow insurers to charge very high rates for individual policies, while others are more regulated. Check before you move.

TopRetirements.com has done its best to make this list accurate and up to date. The states sometimes change their taxation policies which could affect its rankings. If you are aware of something that affects the rankings, please let us know send us an email.

Robert Powell is editor of Retirement Weekly, published by MarketWatch. Learn more about Retirement Weekly here. Follow his tweets at RJPIII.