Best Places to Stretch Your Nest Egg

When the working years finally wind down, retirees start thinking about the next chapter: where to live in retirement. But it’s not just about sunshine, golf courses, or being near family. For many Americans on a fixed income, state taxes can make or break a retirement budget.

Not every state treats pensions, Social Security, or withdrawals from 401(k)s and IRAs the same way. Some tax retirement income heavily, while others give you a complete break. If you’re wondering about the best states to retire with low taxes, here’s what you need to know — including the states where retirement income isn’t taxed at all.

Why Retirement Taxes Matter

Federal income tax is the same everywhere, but state rules differ dramatically. A retiree drawing $40,000 a year from an IRA in a high-tax state might lose several thousand to state taxes. Someone in a no-income-tax state keeps every dollar.

Over the course of a 20-year retirement, that difference could easily total $40,000 or more — money that could go toward travel, healthcare, or simply peace of mind. That’s why choosing a retirement-friendly state can be just as important as choosing the right community.

States With No Income Tax on Retirement

The easiest way to avoid paying state taxes on retirement income is to live somewhere that doesn’t levy income taxes at all. As of 2025, nine states fit this category:

• Alaska

• Florida

• Nevada

• South Dakota

• Tennessee

• Texas

• Washington

• Wyoming

• New Hampshire (fully tax-free starting 2025)

For retirees, this means distributions from 401(k) plans, IRAs, and pensions won’t be taxed at the state level. That makes these states some of the best tax havens for retirement.

Important Fine Print

Even among no-tax states, there are a few details worth knowing:

• New Hampshire used to tax interest and dividends, which affected retirees with investment income. That tax is fully repealed starting in 2025, making it a genuine no-tax retirement state.

• Washington doesn’t have an income tax but does impose a capital gains tax on high earners. Many retirees won’t be affected, but those with large investment portfolios should review the rules carefully.

Other Retirement Costs to Consider

Taxes aren’t the only financial factor when choosing a retirement state. Before moving, compare:

• Property taxes – Some no-tax states make up for lost revenue with higher property taxes.

• Sales taxes – States like Tennessee and Nevada rely heavily on sales tax, which raises day-to-day costs.

• Healthcare – Quality and access to hospitals and specialists are critical as you age.

• Overall cost of living – Housing, utilities, and groceries can offset any tax savings if prices are high.

In other words, the best states for retirement taxes aren’t automatically the cheapest states for retirement.

Choosing the Right State for Your Retirement

Finding your perfect retirement spot is about balance. A no-income-tax state can help stretch your savings, but lifestyle, healthcare, and affordability matter just as much.

👉 Bottom line: If keeping more of your retirement income is your top priority, consider one of the nine no-income-tax states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and (starting in 2025) New Hampshire.

The less you hand over to the state, the more you’ll have to enjoy your golden years.