Most Expensive States to Retire In: Where Your Savings Won’t Last
Discover which states have the highest retirement costs and how factors like taxes, housing, and healthcare can impact your long-term financial security.
Retirement planning isn’t just about savings—it’s also about location. Some states have such high costs of living that even a well-funded retirement account can be stretched thin.
Certain states stand out for expensive housing, taxes, and everyday expenses, making them challenging for retirees on fixed incomes. Here’s a look at some of the most costly places to retire and why they can drain savings faster than expected.
Hawaii
Hawaii offers stunning scenery and a relaxed island lifestyle, but it also has some of the highest costs in the country. Everyday expenses, from groceries to utilities, are inflated due to the state’s reliance on imported goods. A gallon of milk can cost over $6, and electricity rates are more than double the national average.
Housing is another major expense. The median home price exceeds $800,000, and even modest rentals are costly. A one-bedroom apartment in Honolulu often rents for over $2,000 per month. While property taxes are relatively low, the high cost of buying or renting overshadows that benefit.
Taxes add to the financial burden. Social Security benefits are exempt, but pensions and 401(k) withdrawals are taxed. Hawaii’s income tax rates range from 1.4% to 11%, among the highest in the nation. The state’s general excise tax, which applies to nearly all transactions, further increases costs.
New York
Retiring in New York is expensive beyond just New York City. While upstate regions have lower housing prices, property taxes are among the highest in the country, averaging 1.73% of a home’s assessed value. Even in areas with affordable homes, retirees can face annual tax bills exceeding $10,000.
Healthcare costs are another challenge. A private room in a nursing home averages over $160,000 per year, and assisted living facilities often charge more than $60,000 annually. Even with Medicare, out-of-pocket expenses for supplemental insurance, prescriptions, and co-pays can be significant.
State income taxes also impact retirees. While Social Security benefits and New York public pensions are exempt, 401(k) withdrawals and out-of-state pensions are taxed, with rates reaching 10.9% for high earners. The state also has an estate tax starting at 3.06% for estates over $6.94 million.
California
California’s high cost of living extends beyond housing. Gas prices regularly exceed the national average due to state taxes and environmental regulations. Dining out is also expensive, with restaurant prices in cities like Los Angeles and San Francisco often 20–30% higher than in other parts of the country.
The state’s tax structure is another hurdle. While Social Security benefits are exempt, withdrawals from 401(k) plans, IRAs, and pensions are fully taxed, with rates ranging from 1% to 13.3%, the highest in the nation. California does not offer tax deductions on retirement income, requiring careful planning to minimize tax liability.
Healthcare costs are also high. A private room in a nursing home averages over $150,000 per year, and long-term care insurance premiums can be expensive. Even routine medical visits and prescriptions cost more due to the state’s regulatory environment.
Massachusetts
Massachusetts has high housing costs, especially in the Greater Boston area, where median home prices exceed $600,000. Even in smaller cities like Worcester or Springfield, real estate prices have risen, limiting affordable options. Renters face similar challenges, with one-bedroom apartments in Boston averaging over $2,800 per month.
The state’s tax structure can also reduce retirement savings. Massachusetts applies a flat 5% income tax on most retirement income, including 401(k) and IRA withdrawals, as well as private pensions. While Social Security benefits and public pensions from Massachusetts government jobs are exempt, retirees relying on other income sources may face higher tax burdens.
Massachusetts also has an estate tax, with rates between 0.8% and 16% on estates over $2 million, affecting retirees with substantial assets.
New Jersey
New Jersey has the highest property tax rate in the country, averaging 2.21% of a home’s assessed value. Even a modest home can result in annual tax bills exceeding $10,000, making homeownership difficult for retirees on fixed incomes. Some property tax relief programs exist for seniors, but eligibility requirements are strict.
Everyday expenses are also high. Groceries, transportation, and healthcare costs exceed the national average, particularly in areas near New York City and Philadelphia.
The state’s tax policies further complicate retirement planning. While Social Security benefits and military pensions are exempt, 401(k) and IRA withdrawals are taxed. New Jersey offers an exclusion for retirees earning below $150,000, but those above this threshold face tax rates from 1.4% to 10.75%. The state also has both an inheritance tax and an estate tax, affecting wealth transfer.
Connecticut
Connecticut is expensive for retirees due to high housing costs, taxes, and healthcare expenses. The median home price is above $350,000, and in Fairfield County, prices often surpass $700,000. Renting isn’t much cheaper, with one-bedroom apartments in Stamford and Hartford frequently exceeding $2,000 per month.
Taxes further strain retirement budgets. The state taxes most retirement income, including pensions, 401(k) withdrawals, and IRA distributions, with rates from 3% to 6.99%. While Social Security benefits are partially exempt for lower-income retirees, higher earners may see their benefits taxed. Connecticut also has an estate tax ranging from 10.8% to 12%, with an exemption threshold of $9.1 million in 2024.
Healthcare costs are another concern. Connecticut ranks among the most expensive states for medical care, with high premiums for supplemental insurance and long-term care services.