States like Florida, Nevada and Texas are popular with retirees because they don’t tax personal income at all. However, state income tax rates aren’t the only financial factor to consider when you decide to relocate in retirement. It’s also important to check the average cost-of-living which can drive up your monthly expenses.
What Factors Determine The Cost Of Living?
The cost of living in a particular area is determined by how much you need to spend to pay for expenses like housing, food, utilities, transportation and out-of-pocket health care costs. For retirees, housing is the highest living expense accounting for approximately 33% of monthly costs. When estimating the cost of housing in a particular state, don’t forget to include property taxes and maintenance.
Take A Close Look At State Property Taxes
It’s simple, really. States that don’t tax income have to generate revenue by raising taxes in other ways and real estate taxes top the list. As reported in the news, Florida experienced a spike in property taxes due to rapidly rising real estate values while the Lone Star State has some of the highest property taxes in the US.
“As a result, zero-income tax states like Florida and Texas are not considered less expensive when it comes cost of living.”
When property taxes rise, homeowners’ insurance also tends to increase. As recently as 2024, it’s been reported that homeowners’ insurance in Florida has increased 102% in the last three years. And, since 2018, Texas homeowners have seen a 50.9% increase in their insurance rates. As a result, zero-income tax states like Florida and Texas are not considered less expensive when it comes to cost of living.
Top 5 States With The Lowest Cost Of Living
When it comes to the overall cost of living, the five most affordable states for retirees are in the Midwest and the South. The following list was determined by comparing each state’s median housing prices and average income to the national average cost of living:
- 1. Kansas – 14% below the national average.
- 2. Oklahoma – 13.6% below the national average.
- 3. Mississippi – 12.5% below the national average.
- 4. West Virginia – 12.3% below the national average.
- 5. Alabama – 11.9% below the national average.
Also Consider Access To Healthcare Before You Relocate
As you get older you’ll likely be dealing with age-related health issues. That’s why it’s important to analyze access to medical services that are covered by your health care insurance. Also consider there may come a time when you’ll need pay for the cost of long-term care that’s not covered by your insurance at all. Before you decide, connect with an FRC® trained advisor who can help you analyze your options.
