No surprise, Alaska ranks as the worst US state to retire in for the second year running — but which one is best? What you need to know when deciding where to live in your golden years
The “Last Frontier” is the last place U.S. retirees should consider moving to in their golden years, according to a new study that ranks the best and worst states to retire in.
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To determine the retirement ranking, Bankrate weighed five categories: affordability (40%), wellbeing (25%), health care quality and cost (20%), weather (10%) and crime (5%). Data was obtained from various sources, including the U.S. Census Bureau, the the Tax Foundation think tank and the National Oceanic and Atmospheric Administration, among others.
Despite its breathtaking natural splendor, Alaska ranked as the worst state to retire in for the second year running — thanks largely to its long and frigid winters with short hours of daylight and heavy snowfall.
It also ranked poorly for affordability. House prices in the state soared last year, with an average home selling for around $423,000, according to a recent report from the Alaska Department of Labor and Workforce Development. Rising interest rates have only damaged affordability further.
These challenges defy many soon-to-be retirees’ dreams to kick back and relax in their golden years. Many traditional retirement destinations boast warmer weather, a relatively low cost of living and other perks like tax breaks for seniors.
The worst states to retire in
After Alaska, the four worst states to retire in are New York, California, Washington and Massachusetts, according to Bankrate.
New York ranked 20th on the same list in 2022, but dropped to 49th place this year due to its extreme cost of living in this period of high inflation and elevated interest rates.
California ranked as the third worst state to retire in for the second consecutive year due to its poor affordability. The Golden State is struggling with a housing crisis, and to make matters worse, the state recently faced an exodus of home insurers who cited increased wildfire risks and soaring construction costs as their reasons for leaving the market.
It’s far from impossible to retire in states with high living costs, but it does require careful planning. Karen B, a 64-year-old escrow mortgage officer based in Southern California, told Bankrate she plans to stay in the Golden State after saving aggressively for retirement for 20 years.
“I had friends tell me that I became the master of saving,” she said. “There was no instant gratification, and I encouraged friends and family to do the same.”
Read more: ‘It makes an enormous difference’: Warren Buffett says this simple ‘trick’ is the key to earning a generous retirement nest egg
The best states to retire in
Iowa is the best state for retirement, according to the study, followed by Delaware, West Virginia, Missouri and Mississippi.
Iowa may not be the first place you think of spending your golden years, but it offers residents a great bang for their buck. It is the sixth most affordable place to live in the U.S., with homes valued at around $211,000 on average, according to Zillow. Iowa is also rated highly by Bankrate for its high-quality health-care services and low health-care costs — an important consideration for retirees.
What’s more, the Midwestern state boasts certain tax advantages for older residents. For instance, it does not tax Social Security benefits, and Iowans age 55 and older are exempt from paying state taxes on retirement income from tax year 2023 onwards.
The rest of the states to round out the top five share several similarities. West Virginia, Missouri and Mississippi all scored highly for affordability based on their relatively low cost of living. Meanwhile, Delaware was ranked second for overall well-being.
Where should you retire?
Where you retire is a deeply personal choice. While state rankings on data like affordability, weather and health care can provide helpful insights, ultimately your decision should come down to your own priorities.
There are many questions to consider in the years leading up to your retirement. For instance, do you want to be close to family? Do you want to soak up the sun on the beach or the golf course, or would you rather be skiing in the mountains? Do you want to sell your family home and downsize?
If you’re not sure where to start, consider working with a financial adviser who can help you make a plan and figure out how much money you’ll need to live comfortably once you stop working.
Wherever you decide to retire, it’s important to have a solid nest egg you can build on via tax-friendly investment vehicles like a 401(k) account or an individual retirement account — to help you live the retirement lifestyle you desire.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.