The cost of retirement varies more by state than most pre-retirees realize. A comfortable retirement in Oklahoma costs roughly $52,000 a year. The same lifestyle in Hawaii costs more than $110,000. Compounded across a 25-year retirement, the gap exceeds $1.5 million in required savings. This article synthesizes publicly available data on the cost of retirement in all 50 states, drawing primarily on the Bureau of Labor Statistics 2024 Consumer Expenditure Survey for households aged 65 and older, the Missouri Economic Research and Information Center’s Q3 2025 Cost-of-Living Index, the Social Security Administration’s Monthly Statistical Snapshot, and recent analyses by GOBankingRates, Kiplinger, Fidelity, and Milliman. The figures presented are best used as comparative benchmarks rather than personal planning targets.
How We Define Cost of Retirement
Cost of retirement, as used in this article, refers to the average annual expenditures of a household with members aged 65 and older, adjusted for state-level cost of living. The headline state-by-state table combines two underlying calculations.
The annual cost of living for each state is calculated by multiplying the BLS 2024 Consumer Expenditure Survey data for households aged 65 and older by each state’s Q3 2025 cost-of-living index from the Missouri Economic Research and Information Center. The minimum savings needed is calculated by subtracting average annual Social Security income ($22,437 per the SSA’s November 2025 snapshot) from each state’s annual cost of living, then dividing the remainder by 0.04 to reflect a 4% annual withdrawal rate over a 25-year retirement. This is the standard methodology used in published retirement-planning research.
The 30 Least Expensive States to Retire
The states with the lowest annual cost of retirement cluster in the Midwest, South, and parts of the Plains. These states benefit from lower housing costs, generally lower utility rates, and in many cases tax policies that exempt most or all retirement income. The table below lists the 30 states with the lowest minimum savings required to fund a 25-year retirement under a 4% withdrawal rate.
| Rank | State | Annual Cost of Living | Annual Cost After Social Security | Minimum Savings Needed |
| 1 | Oklahoma | $51,849 | $29,411 | $735,284 |
| 2 | Mississippi | $52,524 | $30,087 | $752,178 |
| 3 | Alabama | $53,999 | $31,561 | $789,037 |
| 4 | West Virginia | $54,122 | $31,684 | $792,109 |
| 5 | Kansas | $54,613 | $32,176 | $804,395 |
| 6 | Missouri | $54,674 | $32,237 | $805,931 |
| 7 | Arkansas | $54,859 | $32,422 | $810,358 |
| 8 | Tennessee | $55,473 | $33,036 | $825,896 |
| 9 | Iowa | $55,473 | $33,036 | $825,896 |
| 10 | Indiana | $55,657 | $33,220 | $830,504 |
| 11 | Texas | $55,780 | $33,343 | $833,575 |
| 12 | North Dakota | $56,087 | $33,650 | $841,254 |
| 13 | Nebraska | $56,272 | $33,834 | $845,862 |
| 14 | Georgia | $56,395 | $33,957 | $848,933 |
| 15 | South Dakota | $56,395 | $33,957 | $848,933 |
| 16 | Kentucky | $56,456 | $34,019 | $850,469 |
| 17 | New Mexico | $56,825 | $34,387 | $859,684 |
| 18 | South Carolina | $56,825 | $34,387 | $859,684 |
| 19 | Louisiana | $56,947 | $34,510 | $862,756 |
| 20 | Ohio | $57,009 | $34,572 | $864,291 |
| 21 | Minnesota | $57,869 | $35,432 | $885,793 |
| 22 | Michigan | $58,176 | $35,784 | $893,472 |
| 23 | Wyoming | $58,545 | $36,107 | $902,686 |
| 24 | Illinois | $58,913 | $36,476 | $911,901 |
| 25 | Pennsylvania | $59,650 | $37,213 | $930,331 |
| 26 | North Carolina | $59,835 | $37,398 | $934,938 |
| 27 | Wisconsin | $60,019 | $37,582 | $939,546 |
| 28 | Nevada | $60,572 | $38,135 | $953,368 |
| 29 | Idaho | $60,818 | $38,380 | $959,511 |
| 30 | Utah | $60,879 | $38,442 | $961,047 |
Sources: GOBankingRates (January 2026), Kiplinger, BLS Consumer Expenditure Survey 2024, MERIC Q3 2025 Cost-of-Living Index, Social Security Administration Monthly Statistical Snapshot (November 2025).
The 20 Most Expensive States to Retire
The states with the highest annual cost of retirement are concentrated in the Northeast and on the West Coast, with Hawaii and Alaska at the extremes. Housing is the dominant driver in all of these states, with Hawaii’s housing cost-of-living index sitting at 298.6 (nearly three times the national average) and Massachusetts and California at 232.9 and 191.8, respectively. Several of these states also impose meaningful taxes on retirement income, layering an additional cost on top of the higher baseline cost of living.
| Rank | State | Annual Cost of Living | Annual Cost After Social Security | Minimum Savings Needed |
| 31 | Florida | $61,125 | $38,688 | $967,190 |
| 32 | Virginia | $61,493 | $39,056 | $976,405 |
| 33 | Colorado | $63,091 | $40,653 | $1,016,336 |
| 34 | Delaware | $63,152 | $40,715 | $1,017,871 |
| 35 | Arizona | $66,838 | $44,401 | $1,110,019 |
| 36 | New Hampshire | $67,084 | $44,647 | $1,116,163 |
| 37 | Montana | $67,452 | $45,015 | $1,125,377 |
| 38 | Oregon | $68,681 | $46,244 | $1,156,093 |
| 39 | Rhode Island | $69,664 | $47,227 | $1,180,666 |
| 40 | Vermont | $69,848 | $47,411 | $1,185,274 |
| 41 | Washington | $69,971 | $47,534 | $1,188,345 |
| 42 | Connecticut | $70,094 | $47,657 | $1,191,417 |
| 43 | Maine | $70,155 | $47,718 | $1,192,953 |
| 44 | New Jersey | $70,401 | $47,964 | $1,199,096 |
| 45 | Maryland | $73,043 | $50,605 | $1,265,135 |
| 46 | New York | $77,773 | $55,336 | $1,383,392 |
| 47 | Alaska | $78,449 | $56,011 | $1,400,286 |
| 48 | California | $83,998 | $61,540 | $1,538,508 |
| 49 | Massachusetts | $92,639 | $70,202 | $1,755,055 |
| 50 | Hawaii | $110,393 | $87,956 | $2,198,902 |
Sources: GOBankingRates (January 2026), Kiplinger, BLS Consumer Expenditure Survey 2024, MERIC Q3 2025 Cost-of-Living Index, Social Security Administration Monthly Statistical Snapshot (November 2025).
Cost Breakdown by Category
| Category | Annual Spending | Share of Total | Notes |
| Housing (shelter, utilities, maintenance) | $20,362 | 33.1% | Largest single category. Owned-dwelling costs decline with age, but utility and maintenance costs remain steady. |
| Transportation | $9,290 | 15.1% | Fuel, insurance, and vehicle expenses. Drops as retirees drive less. |
| Healthcare | $7,540 | 12.3% | 28.9% higher than the all-household average. Rises steadily after age 75. |
| Food (at home and away) | $7,452 | 12.1% | Slightly lower than working-age households as fewer meals are eaten away from home. |
| Personal insurance and pensions | $4,200 | 6.8% | Drops sharply in retirement as wage-based pension contributions end. |
| Entertainment | $3,140 | 5.1% | Includes travel, hobbies, and audio/visual equipment. Peaks for ages 65-74 then declines. |
| Cash contributions and gifts | $3,030 | 4.9% | Includes gifts to family and charitable giving. Higher share than working-age households. |
| Apparel and services | $1,140 | 1.9% | Declines significantly in retirement. |
| All other expenditures | $5,278 | 8.6% | Includes personal care, reading, education, alcohol, tobacco, and miscellaneous. |
| TOTAL | $61,432 | 100% | Average annual expenditures for households aged 65 and older, 2024. |
Source: Bureau of Labor Statistics, Consumer Expenditure Survey 2024, age of reference person 65 and older. Healthcare comparison figure (28.9% higher than all-household average) from DepositAccounts analysis of BLS data.
Key Takeaways
- Housing is the single largest expense category for retired households, accounting for roughly one-third of total annual spending. It is also the category that drives the most state-by-state variation, with shelter costs in Hawaii running nearly three times the national average and shelter costs in Oklahoma City running 43% below it.
- Healthcare runs 28.9% higher for retired households than for the general population, even though total spending is lower in retirement overall. Healthcare share rises with age, particularly after 75, and consistently outpaces general inflation, meaning healthcare’s share of the retiree budget compounds upward over time.
- Transportation drops in retirement as commuting ends, but it remains the second-largest expense category at 15.1% of spending. Vehicle insurance, fuel, and maintenance persist regardless of how often a retiree drives.
- Personal insurance and pension contributions fall sharply in retirement, freeing roughly 6 to 7 percentage points of budget that working-age households allocate to retirement saving. That recovered budget typically gets reallocated to housing, healthcare, and discretionary spending categories like entertainment and gifting.
State Tax Treatment of Retirement Income
Where you retire can move your effective cost of retirement by $3,000 to $10,000 a year before any change in lifestyle. State tax policy has a direct effect on the after-tax value of retirement income. The most consequential tax categories for retirees are state income tax treatment of Social Security benefits, pension income, and 401(k) and IRA withdrawals, alongside property tax rates.
Social Security Taxation
Most states do not tax Social Security benefits in 2026. Only 8 states still tax at least some Social Security benefits, typically above defined income thresholds:
- States still taxing Social Security in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont
- Recent eliminations: West Virginia (effective January 1, 2026, fully exempt), Missouri (2024), Kansas (2024), Nebraska (2025), Iowa (fully eliminated by 2026)
Pension and Retirement Account Taxation
Thirteen states fully exempt all retirement income, including Social Security, pensions, and 401(k) and IRA withdrawals. A handful of other states tax retirement income at the same rates as ordinary wages.
- States with no income tax (9): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
- Additional states that exempt most retirement income (4): Illinois, Mississippi, Pennsylvania, Iowa (age 55+)
- New for 2026: Michigan joins the no-tax list under Public Act 4 of 2023, exempting up to $67,610 (single) or $135,220 (joint) of most retirement income
- Least favorable for retirement income: California, Minnesota, Vermont, and Nebraska tax most retirement income at the same rates as ordinary wages. California’s top rate is 13.3%.
Property Taxes
Property tax rates vary more than any other retirement-relevant tax category. Many states offer additional breaks for residents aged 65 and older.
- Lowest effective rate: Hawaii at 32%, with an average annual property tax payment of $4,180
- Highest effective rate: New Jersey at 23%
- Senior-specific relief: Many states offer homestead exemptions, assessment freezes, and tax credits for residents aged 65 and older that can meaningfully reduce effective rates
Most and Least Tax-Friendly States for Retirees
Synthesizing across Social Security, pension, retirement account, and property tax treatment, the most and least tax-friendly states for retirees are summarized below.
| Tax-Friendliness Tier | States |
| Most tax-friendly (no income tax on most retirement income) | Alaska, Florida, Illinois, Iowa (age 55+), Michigan (2026+), Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wyoming |
| Least tax-friendly for retirees | California, Connecticut, Minnesota, Montana, Nebraska, New Mexico, Rhode Island, Vermont |
Sources: Kiplinger 2026 retirement tax rankings, Tax Foundation, Wealthvieu state-by-state tax guide.
Concrete Dollar Differences
A worked example: consider a retired couple drawing $80,000 in annual income from a combination of Social Security ($22,437), a private pension ($35,000), and IRA withdrawals ($22,563). Their state income tax bill on this income varies significantly:
- Florida, Texas, or Pennsylvania: approximately $0 in state income tax
- California: approximately $2,600 at 2026 rates
- Minnesota: approximately $4,200
- Vermont: approximately $4,500
Layered onto the cost-of-living differences shown in the headline tables, the after-tax effective cost difference between the most and least tax-friendly states for retirees can exceed $15,000 per year for households at higher income levels.This is a hypothetical example and is not representative of any specific situation. Your results may vary.
Historical Cost Trends
The cost of retirement has risen sharply since 2020, driven by post-pandemic inflation, healthcare costs that have consistently outpaced general inflation, and housing price increases. The table below shows three of the most relevant trend lines for retirees over the last seven years: annual general inflation (CPI), the Social Security cost-of-living adjustment (COLA), and annual healthcare CPI growth.
| Year | General Inflation (CPI-U, Dec to Dec) | Social Security COLA | Healthcare CPI Growth | COLA minus CPI |
| 2020 | 1.4% | 1.6% | 1.4% | +0.2 pts |
| 2021 | 7.0% | 1.3% | 3.0% | -5.7 pts |
| 2022 | 6.5% | 5.9% | 4.0% | -0.6 pts |
| 2023 | 3.4% | 8.7% | 3.2% | +5.3 pts |
| 2024 | 2.9% | 3.2% | 3.4% | +0.3 pts |
| 2025 | 2.7% | 2.5% | 3.0% | -0.2 pts |
| 2026 | — | 2.8% | — | — |
Sources: Social Security Administration COLA history (effective January of stated year, calculated from prior year Q3 CPI-W). U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers (CPI-U) and CPI medical care component, December-to-December change. The 2026 COLA of 2.8% was announced by SSA in October 2025; 2026 full-year CPI is not yet available.
Key Takeaways
- COLAs lag inflation by a year. Social Security COLAs are calculated from the prior year’s third-quarter CPI-W, which means benefit increases arrive a year after the inflation they are meant to offset. In 2021, retirees received a 3% COLA against 7.0% actual inflation, losing significant purchasing power before the 2022 and 2023 COLAs caught up.
- Healthcare inflation outpaces general inflation in most years. Medical care CPI grew faster than overall CPI in 4 of the last 6 years. Because retirees spend roughly 12% of their budget on healthcare (compared to about 8% for working-age households), this gap compounds disproportionately on retiree budgets.
- The 2022-2023 COLAs were historic. The 5.9% (2022) and 8.7% (2023) COLAs were the largest since the early 1980s, reflecting the 40-year-high inflation that peaked at 9.1% in mid-2022. Both COLAs have since reset back toward the long-term average of roughly 2.6%.
- Cumulative impact: A retiree who began retirement with $50,000 in annual expenses in January 2020 would need approximately $63,000 by the end of 2025 to maintain the same purchasing power, based on compounded CPI-U change. Cumulative Social Security COLAs over the same period covered roughly 96% of that increase, with the 2022 and 2023 catch-up COLAs largely offsetting the 2021 lag. The cumulative number masks the year-by-year purchasing-power volatility that retirees experience as COLAs always trail by one year.
What This Data Tells Us About Retirement Planning
Too often, the geographic decision is not treated with the same rigor as the investment decision. That is a mistake.The data above shows that geography can drive a $1.5 million difference in required retirement savings, which may be larger than the difference most clients see between an aggressive and a conservative investment allocation over the same period.
A few observations stand out from this data that may be useful for households thinking through their own situation.
First, the cost-of-living differences and the tax differences are mostly independent of each other. Pennsylvania is in the middle of the cost-of-living rankings but is one of the most tax-friendly states for retirement income. Connecticut is expensive and also taxes Social Security. The most appropriate planning move might not be the obvious one of moving to Florida; it may be the less-obvious one of staying typically in a state that taxes retirement income lightly while accepting a moderately higher cost of living.
Second, healthcare costs are the single most under-modeled retirement expense in many financial plans. The Fidelity figure of $172,500 per person is a useful benchmark, but it averages across health status, region, and longevity. For a household with one chronic condition or a meaningful family history, the real number can be double that. The right planning question is not what the average healthcare cost is, but what the realistic 90th-percentile cost is for your specific situation.
Third, the relocation decision is usually more expensive than households assume. The savings from moving to a lower-cost state are real, but moving costs, the loss of local relationships, the disruption to specialist healthcare relationships, and the often-overlooked tax friction of the state-of-residency change itself can erase the first two to three years of savings. Households should model the move as a 10-year financial decision, not a year-one cost comparison.
Planning Retirement in Pennsylvania and Virginia
The state-by-state data above is useful for any household weighing where to retire. For households already living in or planning to retire in Pennsylvania or Virginia, the specifics matter even more. Pennsylvania is one of the most tax-friendly states in the country for retirees, fully exempting Social Security, pensions, and 401(k) and IRA withdrawals from state income tax. Virginia offers meaningful retirement-income exemptions for residents over 65 and additional advantages for federal employees and government contractors who live in the DC metro area.
YTS Wealth Management is based in Pennsylvania and Virginia, with offices in Export, Aspinwall, Williamsport, McLean, and Blacksburg. We focus on the retirement planning needs of households in these two states, including federal employees navigating FERS pensions and Thrift Savings Plan rollovers, government contractors with equity compensation, business owners planning exits, and pre-retirees coordinating Social Security, pension, and account-based income with state tax treatment.
If you live in Pennsylvania or Virginia and would like to discuss how the data above applies to your specific situation, schedule a financial planning consultation at ytswealth.com or call 724-733-4334.
Disclosure
This material was prepared by First Page Sage for YTS Wealth Management. First Page Sage is a third-party consultant and was compensated by YTS Wealth Management for the preparation and distribution of this information.
This content is for informational purposes only and is not intended to serve as a substitute for personalized investment, tax, or retirement advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Economies and markets fluctuate. Tax laws and benefit thresholds are subject to change. Facts presented have been obtained from sources believed to be reliable; however, neither YTS Wealth Management nor First Page Sage can guarantee the accuracy or completeness of such information. Past performance is not an indicator of future results.
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