While the size of your nest egg can help determine how comfortable you’ll be in retirement, so does where you choose to live. And some states do a better job of setting up residents for success in retirement.
That’s according to a Caring.com study, which analyzed a number of factors — average retirement income, homeownership rates and annual cost of a comfortable retirement — to determine which states best support residents’ financial preparedness for retirement. (1)
The study highlights the top five states for financial readiness, explains why they scored so highly, and offers insight into what retirees should weigh when deciding where to live.
Must Read
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don’t have to deal with tenants or fix freezers. Here’s how
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and 3 simple steps to fix it ASAP
- Robert Kiyosaki says this 1 asset will surge 400% in a year — and he begs investors not to miss its ‘explosion’
Top 5 states to set older Americans up for success in retirement
Below are the five states that scored highest in the study — and why each one stands out for retirees looking to make their money last.
5. Illinois
- Retirement Score: 6.43
The state doesn’t top the charts in any single category, but it performs solidly across the board — retirement income, savings, and homeownership rates are all close to national averages. What helps Illinois stand out is its relatively affordable housing market compared with coastal states, which can make fixed retirement budgets stretch further.
Still, the state’s higher overall tax burden can offset some of those gains, making Illinois best suited for retirees who value stability over extremes.
4. Minnesota
- Retirement Score: 6.48.
A higher-than-average household income helps residents build stronger retirement savings than many of their peers, while homeownership rates remain robust. That financial foundation gives Minnesota retirees a solid cushion, though the state’s higher cost of living can erode some of those advantages. For retirees who have already built up a healthy nest egg, Minnesota offers a stable environment, but it may be less attractive for those who need to make every dollar stretch.
3. Connecticut
- Retirement Score: 6.53
Connecticut, at No. 3, has the highest average retirement savings. And retirees with an adjusted gross income (AGI) of less than $75,000 are partially exempt from taxes on Social Security. (2)
Connecticut is also one of 10 states with active state-sponsored retirement plans, which can make it easier to contribute to savings (since it’s automatic). Many other states are considering retirement mandates. (3)
But if you live in Alabama, Florida, Montana, South Dakota or Texas, you’re out of luck — no steps have been taken toward state-sponsored retirement mandates at this point.
2. Virginia
- Retirement Score: 7.20
Virginia, which came in at No. 2, has a high median household income of $89,931, which could explain why Virginians have more retirement savings than many other Americans — averaging $492,965, the sixth-highest amount in the country. (4)
1. Delaware
- Retirement Score: 7.45
According to Caring.com’s study, Delaware is the state that sets people up for the most success in retirement. This is because in Delaware, the average retirement income is eighth-highest in the country (at $31,300 per household). While it’s not the highest, residents have a relatively lower cost of living than many other states, spending on average 16% less on groceries than Colorado and California.
But the state has other perks for seniors: their Social Security retirement benefit isn’t taxed and there’s no shopping tax, either. And, with certain retirement plans like 401(k)s, residents aged 60+ can deduct up to $12,500 from their taxable income. That means they can hold onto more of their money. (5)
Read more: I’m almost 50 and have nothing saved for retirement — what now? Don’t panic. These 6 easy steps can help you turn things around
Other factors to consider
Of course, the top five aren’t the only states worth considering. Your personal priorities — from affordability to health care — could matter even more than a high rank in one study.
Cost of living: While retirees in Connecticut might have a larger-than-average nest egg, they still fall short of what they need in retirement by 35%, according to the Caring.com study. In part, that’s because the state has a higher cost of living, including the cost of health care. (6)
In states that have a lower cost of living — for housing, health care, transportation and food — seniors can stretch their dollar further.
When that’s taken into consideration, West Virginia is considered the most affordable state because of its low property costs and lower-than-average costs for groceries and utilities, which allow retirees to live comfortably on $58,190 a year. Trailing behind West Virginia is Oklahoma and Kansas. (7)
Homeownership: The Caring.com study focuses on monetary assets rather than physical assets like property. But, if you pay off your mortgage before you retire, you’ll have fewer fixed costs in your golden years — especially if you live in a state that provides property tax relief for seniors.
Almost four in five West Virginians (79.1%) own their homes, followed by Mississippi (75.8%) and Delaware (75.1%), according to Caring.com. While Delaware was the top state for setting up retirees for success, West Virginia and Mississippi didn’t crack the top 10 — so while homeownership is important, it’s not the only factor for a successful retirement. (8)
However, owning your own home could potentially serve as a source of passive income as you get older (by renting out a room or basement suite). Or, you could sell and downsize, using the difference to help fund your retirement. And, if necessary, you could access equity in your home.
Taxes: While federal income tax applies no matter where you live — even abroad — some states have no income tax. Some states don’t tax Social Security benefits or distributions from retirement accounts.
The most tax-friendly state for retirees is Mississippi, according to Kiplinger data. (9) Social Security benefits, private and public pensions and withdrawals from retirement accounts like 401(k)s are exempt from state taxes. And there’s no estate or inheritance tax.
However, while tax breaks may be appealing, it’s also important to consider the broader picture when deciding where to retire. For example, Mississippi has a high homeownership rate and tax-friendly environment for retirees. But it also consistently ranks low in healthcare access and outcomes.
Retirement readiness depends on more than just your savings balance — where you live can determine how far that money goes. While Delaware, Virginia, Connecticut, Minnesota and Illinois rank as the most supportive states financially, factors like affordability, homeownership, tax structure and even health care access should all be part of the equation.
What to read next
- Are you richer than you think? 5 clear signs you’re punching way above the average American’s wealth
- Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich — and ‘anyone’ can do it
- This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchase. Here’s how to buy the coveted asset in bulk
- 22 US states are now in a recession or close to it — protect your savings with these 5 essential money moves ASAP
Join 200,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Caring.com (1, 2, 4, 5, 6, 7, 8); ADP (3); Kiplinger (9)
This article originally appeared on Moneywise.com under the title: These 5 states give retirees the best shot at financial security, says new study — here’s what makes them so great
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.