Key Points
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With 4.2 million Americans retiring in 2025, many are looking for locales with low cost of living.
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Cost of living, state tax laws and healthcare affordability are key factors.
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These 10 states are especially attractive due to favorable tax scenarios and living costs.
More and more Americans are retiring every day, with 4.2 million expected to reach age 65 in 2025. This is being called the “Peak 65” surge. The baby boom took place in the U.S. from 1946 to 1964, with the peak coming in 1960. If you were born during the peak, you’ll be turning exactly 65 this year.
If you’re in the process of retiring or you’re already retired, you must squeeze the most out of your savings. That could include living in or moving to a state with a low cost of living, plus one that is friendly to retirees.
The average American in the 65-74 age group has just $609,230 saved, according to a survey in 2022. The median is still much lower as of 2025. Living comfortably on even double that amount will require you to make some smart choices about where you’ll be living. Here are 10 states worth considering.
#10 Wyoming
The Cowboy state is all about low taxes. There’s no state income tax or tax on retirement income. Social Security payments and retirement account withdrawals are tax free.
The state has a low effective property tax rate of 0.58%, and there are some property tax exemptions for seniors. Even groceries come without a sales tax in Wyoming.
In terms of assisted care living, the state is also attractive (with an average cost of $58,092 per year). The home care rate is $37/hour, with average memory care costing $4,025/month.
Overall, the cost of living is about 6% cheaper than the U.S. average.
#9 Florida
The Sunshine State has always been an attractive spot for retirees. The state still has a strong senior infrastructure with established retirement communities.
The cost of living can be high in many areas, but is offset by tax benefits. The effective property tax rate is a low 0.79%, and a homestead exemption is available. Some counties can grant up to a $50,000 exemption for seniors with an income under $35,000. Like Wyoming, there’s no state income tax or tax on retirement withdrawals.
The average annual assisted living program costs $65,802. The average home care rate is $30/hour.
#8 South Dakota
The Mount Rushmore State ranks No. 3 nationally for low cost of living. Plus there’s no state income tax or levies on withdrawals from IRAs, 401(k)s, or pensions.
The effective property tax rate is 1.09%, and a homestead credit is available. Even some renters get tax credits in South Dakota.
For assisted living, average annual costs are $64,272/year. The home care rate is about $30/hour, and memory care costs about $7,174/month. Overall, the state has a strong rural healthcare network.
#7 Georgia
The fast-growing Peach State is known for high-quality healthcare in major metro areas. Assisted living costs an average of $61,058/year. The average home care rate is $30/hour, and memory care costs come in at $4,914/month.
On the tax front, retirement income up to $65,000 annually is exempt. There’s no tax on Social Security benefits. Property tax rate: 0.81% effective. Qualifying seniors get a $4,000 per month homestead exemption (with an even higher exemption rate in some counties).
#6 Texas
The Lone Star State is also growing rapidly with large influxes of retirees. There’s no state income tax or tax on Social Security and retirement funds. There’s no sales tax on groceries or medications.
The effective property tax rate is 1.58%. A portion of those taxes allocated for schools doesn’t apply to those aged 65 and older. There is a homestead exemption as well.
The average cost for an assisted living facility is $64,890/year. Home care rates average $29/hour.
#5 Tennessee
The Volunteer State is low cost and tax friendly. The state doesn’t have an income tax, nor does it tax retirement withdrawals or Social Security benefits. Tennessee taxes groceries 4%, but there’s a legislative effort to abolish this.
The effective property tax rate is a low 0.55%. There’s a property tax freeze option for qualifying seniors.
If you require assisted living, expect to pay on average $57,744/year. The home care rate is $20.5/hour.
Some say the state’s mild climate reduces utility costs.
#4 Arkansas
Known as the Natural State, Arkansas might also be called the Affordable State. It ranks No. 1 for low cost of living. Rural areas are especially affordable. Abundant parks and natural beauty attract more and more retirees.
There is a state income tax but it tops out at 3.9%, depending on your income. Social Security benefits aren’t taxed but there is a tax on some retirement income. Property taxes are low, with an effective rate of 0.57%.
For assisted living, average annual costs are $58,389, and the home care rate is $30/hour. The average healthcare expenditure per capita is only $9,338, considered low.
#3 Oklahoma
In the center of the country sits the affordable Sooner State. The state ranks No. 4 nationally on cost of living.
There’s a sliding state income tax, topping out at 4.75%. Social Security isn’t taxed but retirement account withdrawals are (after an annual $10,000 exemption). Sales taxes can be high but property taxes are low (effective rate of 0.82%). Overall, housing costs are below the national averages.
The state touts a strong rural healthcare network. Assisted living costs are on the low end, at $57,180 annually. The average home care rate is $30/hour.
#2 Alabama
Alabama ranks at No. 10 nationally for low cost of living. State income taxes range from 2% to 5%, but retirement income is fully exempt. Starting Jan. 1, 2026, the first $12,000 from defined contribution plan withdrawals will be exempt from taxes. The effective property tax rate is a low 0.38%.
Assisted living costs are low. The average cost for a facility is $56,616/year (the 2nd lowest nationally). Home care averages $26/hour. The healthcare expenditure per capita is $9,280.
#1 Mississippi
Right next door to Alabama is low-cost Mississippi. The state is No. 2 for low cost of living. If you combine costs with tax benefits, some experts rank the state as the best for retirement affordability.
There’s no state income tax. Retirement income is fully exempt. There’s no tax on retirement fund withdrawals or Social Security benefits. The effective property tax rate is only 0.74%.
Average assisted living costs are the lowest in the nation, at $54,943/year. The average home care rate is also the lowest possible, at $24/hour. Healthcare expenditure per capita is $9,394.
The image featured at the top of this post is ©Alexander Lukatskiy.