Best States to Retire in 2026

What Makes a State Retirement-Friendly?

For retirees living on fixed income — Social Security, pension payments, and retirement account withdrawals — state taxes can mean a difference of thousands of dollars per year. A retiree in Florida or Wyoming can keep significantly more of their income than one in California or Connecticut.

Our index focuses on the five factors that matter most to retirees on Social Security:

• Social Security taxation — 8 states still tax SS benefits in 2026. This alone can cost $1,000–$3,000+ per year.
• Retirement income taxation — States vary widely on IRA and 401(k) withdrawals. Some exempt all retirement income; others treat it like wages.
• Property taxes — Rates range from under 0.3% (Hawaii) to over 2% (New Jersey, Illinois).
• Sales taxes — Often overlooked. Four states have no sales tax; others exceed 9.5% combined.
• Cost of living — Even with favorable tax laws, high costs can erode savings quickly.

Top States for Retirees in 2026

Mississippi, Florida, Wyoming, Georgia, and South Dakota consistently top our rankings. They combine no or low income tax on retirement income with low property taxes and below-average costs of living. Mississippi is notable for exempting ALL retirement income including 401(k) and IRA distributions even though it has a state income tax.

States to Approach Carefully

California, Connecticut, and Vermont score lowest. California taxes all retirement income at rates up to 13.3% with no special exemptions, and has a very high cost of living. Connecticut and Vermont still tax Social Security and offer limited retirement income relief. That said, tax friendliness is just one factor — healthcare, family proximity, and lifestyle all matter too.

Social Security Tax Changes in 2026

West Virginia completely eliminated its Social Security tax in 2026, joining the growing list of states offering full exemptions. As of 2026, only 8 states still tax SS benefits to any degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. The national trend is toward fewer states taxing SS — not more.