California Retirees Are Leaving: Here’s Where They’re Going Instead
Written by
Ashley Donohoe
Edited by
Nicholas Morine
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Known for its recreational activities, pleasant climate and abundant beaches, the Golden State has appealed to many retirees. But despite these perks and above-average wages, the state’s expensive costs are driving residents to cheaper destinations. The Public Policy Institute of California noted a 407,000 net outflow of California residents between July 2021 and July 2022 alone.
California had the fourth highest cost-of-living (COL) index (134.5) in the first quarter of 2023, per the Missouri Economic Research and Information Center. The Zillow Home Value Index indicated an average home value of $741,789, more than double the national average of $348,126.
Additionally, City Journal reported that the state’s 13.3% top effective income tax rate (up to 14.4% in 2024) has driven away residents. Retirees must pay state taxes on pensions as well as taxable 401(k) account and individual retirement account (IRA) withdrawals.
Hire a Helper conducted a 2022 study that used U.S. Census Bureau data to determine the top states where around 234,000 retirees nationwide relocated. If you’re a Californian retiree, consider these five popular destinations with lower living costs and better tax perks.
1. Florida
Attracting 11.8% of the retirees, the Sunshine State offers nice weather and beaches. In addition to having a lower COL index of 102.3, important costs such as health, utilities and transportation rank below the national average. The average home value is also much lower at $390,052. Even better, Florida is one of the states without an income tax.
2. North Carolina
With a varied climate and many options for recreation, this coastal state drew in 9.6% of the relocating retirees. It has a COL index of 96.1, with only health-related costs ranking above the national average. The average home value sits at $320,922.
The state has a flat income tax rate of 4.75%, but it will fall to 3.99% by 2027. State taxes apply to pensions and 401(k) and IRA withdrawals.
3. Michigan
With 6.6% of the retirees relocating there, Michigan has plenty of beautiful scenery, amenities and varied weather to offer. Its COL index is only 92.7, and all cost categories fall below the national average. The average home value is just $237,028.Â
The state has a flat income tax rate of 4.05%. However, if you were born in 1952 or earlier, there are partial exclusions for IRAs, 401(k)s and pensions. The Michigan Department of Treasury noted the amounts vary by age, filing status and retirement income type.
4. Arizona
Known for its hot, sunny weather and natural features, Arizona became home to 5.9% of polled retirees. Its COL index sits at 107.2, but utility, health and transportation costs are below the national average. The average value for a home is higher than the other options at $420,310.
Although pensions, IRAs and 401(k) accounts are taxable, the state tax rate is just 2.5%. Also, a maximum deduction of $2,500 for pensions is available.
5. Georgia
Whether you prefer a country or urban feel, Georgia offers much variety and a mild climate. Attracting 5.5% of the retirees, the state has a 91.0 COL index that makes it an affordable destination. However, health costs are slightly above the national average. Georgia’s average home value is $319,330.
Georgia has a top income tax rate of 5.75%, but the state will implement a flat rate of 5.49% next year. While pension, IRA and 401(k) income is taxable, the state has an age-based exclusion of either $35,000 (62+) or $65,000 (65+).
More From GOBankingRates
