How Do I Compare Retirement Relocation Costs State by State?

Will I actually save money by moving to a no-income-tax state in retirement?

Not automatically. A no-income-tax state removes one cost category, but retirement spending still has to cover housing, insurance, property taxes, sales taxes, and the broader local price level. A tax-only ranking creates a false finish line.

Start with the price-level check. The U.S. Bureau of Economic Analysis reports that its 2024 Regional Price Parities measure state price levels relative to a U.S. average of 100 and include all consumption goods and services, including housing rents. California's all-items measure was 110.7 in 2024, Hawaii's was 110.0, and New Jersey's was 108.8; Arkansas was 86.9, Mississippi was 87.0, and Iowa and Oklahoma were both 87.8.

That is the first useful correction to a tax-only comparison: lower state income tax does not automatically mean lower household spending. Housing can move the result sharply. The BEA's 2024 housing-rent measure was 154.3 in California and 54.2 in West Virginia. A renter needs the rent line to carry real weight in the worksheet. A homeowner needs the purchase price, property tax, homeowners insurance, maintenance assumptions, and financing terms to carry it instead.

Florida makes the point cleanly. Fidelity identifies Florida among the states with no individual income tax in its tax-year-2024 comparison. But the Florida Office of Insurance Regulation reported county-average annual homeowners premiums including wind coverage ranging from $2,084 in Sumter County to $7,621 in Monroe County, based on insurer-reported data as of March 31, 2025. The agency also says actual charged premiums vary with the insurer, insured value, deductibles, and policy terms. Use a current property-specific quote. A county average is a screening tool, not a moving budget.

For Florida homeowners, the property-tax estimate also needs an ownership-date check. According to the Florida Department of Revenue, after the first year of a homestead exemption, assessed value generally cannot rise by more than 3% or the annual CPI change, whichever is lower. But a purchaser can lose the prior owner's Save Our Homes assessment benefit after a change in ownership, with the property assessed at just value on the following January 1. The cap applies to assessed value, not necessarily the final tax bill, because local millage rates and other components can change.

The Full-Cost Board: compare the same categories for each candidate state. Do not combine them into a vague "tax savings" line.

Which states tax IRA and 401(k) withdrawals?

Most states tax workplace-plan distributions and traditional IRA withdrawals, but the exact answer depends on the state and the taxpayer's deductions, exclusions, credits, and brackets. The IRS Publication 590-B states that, in general, traditional IRA distributions are taxable in the year received. That federally taxable amount is the clean starting input for the state comparison.

Then separate state categories. Fidelity's tax-year-2024 comparison identifies nine states with no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. It also identifies Iowa, Illinois, Mississippi, and Pennsylvania as states that do not tax IRA income. Washington is a special case: the Tax Foundation says it taxes capital gains income rather than wage income.

The number of no-income-tax states can look inconsistent across sources because the reporting years and tax bases matter. The Tax Foundation says that, for tax year 2025, eight states levy no individual income tax, including New Hampshire after its 2025 repeal of its interest-and-dividends tax. That is not a contradiction to a worksheet. It is a prompt to mark the tax year beside every input.

Top rates are not the calculation. The Tax Foundation reports that 42 states levy an individual income tax for tax year 2025, with rates structured differently across states. Build the comparison from the actual applicable rules, not from a state's highest published rate. Fidelity's tax-year-2024 example illustrates why: for a married couple withdrawing $100,000 annually from traditional IRAs, its combined effective federal-and-state rate was 12.98% in Oregon and 7.66% in Iowa, a 5.32-percentage-point difference. That example is useful as a demonstration, not a forecast for another household.

Use the split-source rule: list traditional IRA, workplace-plan, pension, Roth, and taxable-account income on separate rows. Weak worksheet: "retirement income." Strong worksheet: "traditional IRA distribution - federally taxable amount - state treatment." Clear inputs lower the risk of comparing unlike dollars.

Do states tax Social Security benefits?

Most states do not tax Social Security benefits, but nine states did tax them in Fidelity's tax-year-2024 analysis. Social Security deserves its own row because a state can treat it differently from IRA withdrawals, pension income, and wages. Do not assume that a state taxing a traditional IRA also taxes Social Security, or the reverse.

For each candidate state, record the annual Social Security amount, the state's current treatment, and the tax year being used. Then model it beside other income rather than treating it as a blanket tax exemption. This matters most for households with several sources: a pension, a traditional IRA withdrawal, and Social Security can each follow different state rules.

The same discipline applies to account types. IRS Publication 590-B identifies traditional IRA distributions as generally taxable in the year received, while exceptions can affect the federally taxable amount, including rollovers, qualified charitable distributions, tax-free withdrawals of contributions, and the return of nondeductible contributions. Public data does not supply a personalized taxable amount or a property-specific insurance premium. Those are inputs to obtain before a move, not blanks to fill with a statewide average.

Finish with a one-page decision sheet for each state: tax-year rules, income rows, a local housing estimate, property tax estimate, insurance quote, and the BEA price-level context. If household spending also includes recurring discretionary items, keep that budget visible too; practical categories such as functional beverages belong in the spending plan rather than in a tax calculation. The final question is simple: after every recurring line is counted, which location leaves the household with the more workable annual budget?