Study after study supports what many Americans already know: a lot of us are financially unprepared for retirement. One study from Bankrate.com, for example, shows that 26% of U.S. residents between the age of 50 and 64 didn't have anything saved for retirement. And, according to the Transamerica Center for Retirement Studies, 36% of baby boomers plan to rely solely on Social Security as their primary source of income – worrisome, considering that Social Security benefits are intended to replace only about 40% of the average worker’s salary.

Obviously, many Americans are seeking ways to make what money they have last longer. One option is to retire abroad, where it’s possible to find a lower cost of living and affordable health care – not to mention, often, a nicer climate. But if international travel isn’t how you see your future, it may be possible to settle down in a less expensive corner of the United States, where lower costs of living and gentler local taxes mean you can retire on less.

To find these money-saving states, we analyzed data from Bankrate.com’s “Best and Worst States to Retire” data. We looked at the least expensive states in two categories – affordability and taxes (both income and sales taxes) – and found five states that ranked among the cheapest in both categories, making them among today’s least expensive states for retirement. Here they are, in alphabetical order (rankings as of Aug. 3, 2019).

Alabama

Affordability Rank: 10
Tax Rate Rank: 39 (based on data from TaxFoundation.org)

Alabama ranked 10th lowest in cost of living and 39th for taxes. Its 2019 property tax burden (based on the most current data from The Tax Foundation, an independent tax policy research organization) was 15th lowest in the country – Out-of-state government pensions are tax exempt as long as they are defined-benefit plans. Homeowners aged 65+ don’t pay any state property taxes. Cities and counties can still apply levies, but homeowners age 65+ with a taxable income of $12,000 or less qualify for an exemption.

Mississippi

Affordability: 6
Tax Rate Rank: 31

Mississippi earned one of the top spot for the lowest cost of living in the nation, and homeowners aged 65+ are exempt from the first $75,000 of their property's value. Social Security benefits, Railroad Retirement benefits, and qualified retirement plan income (including income from IRAs401(k)s403(b)sKeoghs, and qualified public and private pension plans) are tax exempt.

Oklahoma

Cost-of-Living Rank: 41
Tax Rate Rank: 26

Oklahoma ranked 41st lowest in cost of living, and property tax rates ranked 19th. Social Security and Civil Service Retirement System benefits are not taxed, and residents can exclude up to $10,000 per person (or $20,000 per couple) of other types of retirement income. Seniors who meet income requirements are eligible for both tax refunds and valuation freezes that keep their property taxes the same, even if their home (or the neighborhood) appreciates in value.

Tennessee

Cost-of-Living Rank: 12
Tax Rate Rank: 16

Tennessee residents enjoyed the 12th lowest cost of living in the United States. The state’s tax burden ranks 16th lowest out of all 50 states, and property tax rates ranked 29th lowest. There's no state income tax, but dividends and some interest are taxed at 5%. Taxpayers 65 years old and up who have a total annual income of $37,000 or less ($68,000 for joint filers) are exempt from the tax on dividends and interest.

Texas

Cost-of-Living Rank: 24
Tax Rate Rank: 15

Texas ranked 24th in the nation in cost of living, and 15th in taxes. There is no state income tax, so Social Security benefits and other retirement income avoid taxation, at least at the state level. Individual tax rates ranked 6th in the nation. Homeowners who are 65 or older benefit from two homestead exemptions that keep up to $25,000 of the home’s assessed value from taxes.

Conclusion

Of course, retirement destination decisions shouldn't be totally dictated by finances: It’s important to consider factors such as your recreational interests, hobbies, comfort, health care needs, and proximity to family and friends. Still, retiring in a state that has a low cost of living and favorable taxes can be a good move if you’re trying to stretch your retirement dollars.

It can also be a smart move if you have wealth that you are trying to safeguard for yourself or for future generations, and some states have pushed for tax changes intended to entice retirees. None of the states listed above impose estate or inheritance taxes, including Tennessee, which as of Jan. 1, 2016, stopped imposing an inheritance tax.