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Table of Contents

The Most Expensive States to Retire in

More than half of all Americans—58%—feel like they are not on track for retirement, according to a study from the National Institute on Retirement Security. A recent survey from the U.S. Government Accountability Office shows that 29% of Americans over age 55 have no retirement savings, either in the form of individual retirement plans, employer-sponsored 401(k)s, or defined benefit plans. These and a host of studies and surveys support what many Americans already know: The majority of us are financially unprepared for retirement.

Many people who don’t have the money to retire at home may look for alternatives. Some people might consider moving abroad where there is a lower cost of living and access to affordable healthcare.

But where to go? We looked at data from’s “Best and Worst States to Retire" list to determine which states are the most expensive, taking into consideration each state’s cost-of-living rank as well as its tax-rate rank. We looked at the 10 worst (i.e., most expensive) states in each category, and found six that made top 10 appearances in both categories—making them the priciest places to retire in, overall. Here's the roster, starting with the most expensive state.

New York

  • Cost-of-living rank: 50 (highest)
  • Tax rate rank: 50 (highest)
  • State income tax: 4.0% to 10.9%
  • State sales tax: 4.0% (up to 8.875% total sales tax depending on the municipality)
  • Estate/inheritance tax: Yes/No

New York has the highest cost of living in the U.S. The state’s 12.97% total tax burden for 2019 (the most recent data available from The Tax Foundation, a private tax policy research organization) is well above the national average of 9.9%—and is the highest in the country.

Taxpayers paid $2,929 per capita in state and local taxes in 2016, and the top rate for capital gains is 31.5%, the second-highest rate in the U.S. (after California). State and local governments collect about $2,782 per capita in property taxes in 2016, the 5th highest in the nation.


  • Cost-of-living rank: 46 (5th highest)
  • Tax rate rank: 49 (2nd highest)
  • State income tax: 3.0% to 6.99%
  • State sales tax: 6.35% (7.75% for certain luxury items)
  • Estate/inheritance tax: Yes/No

Connecticut is the 5th most expensive state in terms of cost of living. Its 2012 tax burden of 12.6% ranks 2nd highest in the nation, and taxpayers pay $7,869 per capita in state and local taxes. Property tax collections amount to about $2,726 per capita, which ranks 2nd nationally. 

Connecticut offers no exemptions or tax credits for most pensions or other retirement income—including Social Security benefits (unless the taxpayers have a federal adjusted gross income of less than $50,000, or less than $60,000 for married taxpayers filing jointly). The exceptions are Railroad Retirement benefits and military pensions, which are both excluded from taxes. 


  • Cost-of-living rank: 49 (2nd highest)
  • Tax rate rank: 45 (6th highest rate)
  • State income tax: 1.0% to 13.3%
  • State sales tax: 7.25%
  • Estate/inheritance tax: No/no

California has the 2nd highest cost of living and ranks 6th in terms of tax rates. The individual income tax top rate of 13.3% is the highest among states that impose an individual income tax. Its 2012 tax burden of 11% ranks 6th highest in the nation, and taxpayers pay $5,237 per capita in state and local taxes.

State and local governments collect about $1,365 per person for property taxes. The state sales tax is 7.25% (the highest among the states mentioned here), and the combined rate in special city/county taxing districts can be as high as 9.75%. Although Social Security and Railroad Retirement benefits are exempt from taxes in California, all other sources of retirement income are fully taxed. The state has the highest capital gains tax rate in the country, topping out at 33%.

New Jersey

  • Cost-of-living rank: 43 (8th highest)
  • Tax rate rank: 48 (3rd highest)
  • State income tax: 1.4% to 8.97%
  • State sales tax: 7.0%
  • Estate/inheritance tax: Yes/yes

New Jersey has the 8th highest cost of living and the 3rd highest tax rate in the country. The state’s 2012 tax burden was 12.2%, and taxpayers pay $6,926 per capita in state and local taxes. Property tax collections are about $2,989 per person, which ranks 1st nationally.

New Jersey is one of only two states that levy both an inheritance tax and an estate tax. While close relatives are generally excluded from the inheritance tax, other beneficiaries face tax rates ranging from 11% to 16% on inheritances over $500. The estate tax is set to disappear in 2018. 

Rhode Island

  • Cost-of-living rank: 41 (10th highest)
  • Tax rate rank: 43 (8th highest)
  • State income tax: 3.75% to 5.99%
  • State sales tax: 7.0%
  • Estate/inheritance tax: Yes/no

Rhode Island has the 10th highest cost of living in the country, and the 8th highest tax rate, even though it lowered its top income tax rate from 9.9% to 5.99% in 2011. The state had a 2012 tax burden of 10.8%, and taxpayers pay $4,998 per capita in state and local taxes.

Property taxes are about $2,282 per capita, which ranks 6th nationally. Railroad Retirement benefits are exempt from taxes, and so are Social Security benefits if they fall below the applicable threshold ($80,000 for single filers and up to $100,000 for joint filers). Other retirement income is taxable at ordinary income tax rates.  


  • Cost-of-living rank: 42 (9th highest)
  • Tax rate rank: 41 (10th highest)
  • State income tax: 3.55% to 8.95%
  • State sales tax: 6.0%
  • Estate/inheritance tax: Yes/no

Vermont has the 10th highest cost of living and the 8th highest tax rate. Its 2012 tax burden was 10.3%, and taxpayers pay $4,557 per capita in state and local taxes. Property tax collections amount to about $2,331 per capita, which ranks 5th nationally.

Vermont taxes most retirement income at ordinary income tax rates, including Social Security benefits, which are taxed up to 85% (in sync with the federal rate) of benefits. Railroad Retirement benefits are exempt.

The Bottom Line

Several states have tried to make their tax systems more appealing to retirees. Maine, for example, boosted the amount of pension income you can exclude from state taxes, and Nebraska increased its exemption for Social Security income. The federal exclusion for estate tax was $11.7 million in 2021 and $12.06 million in 2022, and both New York and Maryland are incrementally increasing their own exemptions to match the federal amount.

Whether you are concerned with making your money last longer during retirement or leaving more assets to your children, the local cost of living and tax rate may be an important consideration during retirement. Not that non-financial factors—your interests, hobbies, comfort, health, and proximity to friends and family—aren't important when choosing a retirement destination. Just bear in mind that wherever you retire (be it in place, in another state, or abroad) can have a considerable impact on your finances, as well.

Article Sources
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  1. GAO. "Retirement Security."

  2. Tax Foundation. "State and Local Tax Burdens, Calendar."

  3. Internal Revenue Service. "Estate Tax."

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