Why Retirees Are Leaving ‘Cheap’ States — and Where They’re Going Instead
Written by
John Csiszar
Edited by
Levi Leidy
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Florida and Texas have long been popular destinations for retirees, especially those with high income. In addition to offering mild weather year-round, both Florida and Texas have no state income tax. They also generally have a lower cost of living than coastal states like New York and California. But these so-called “cheap” states have some financial drawbacks as well, prompting many seniors to reconsider where and how they want to spend their golden years.
Here’s a look at what those costs are and where many retirees are moving instead.
The Unseen Costs in ‘Cheap’ States
In addition to the lack of state income taxes in Texas and Florida, neither state taxes Social Security benefits or retirement income either. For seniors living on pensions or retirement accounts, this obviously goes in the plus column.
But this lack of taxation doesn’t tell the full story.
In both states, insurance costs are skyrocketing. According to Insurify, Florida now has the highest insurance premiums in America, averaging $14,140 annually. And that’s if you can even get insurance, as major companies like Progressive, AAA and Farmers have scaled back or even exited the Florida home insurance market. Insurify notes that a combination of factors are responsible for the high premiums in Florida, from inflation and fraudulent claims to a large number of lawsuits and natural disasters.
Home insurance premiums are also skyrocketing in Texas. Per the Houston Chronicle, the main causes are the increasing risk of floods, wind damage and other climate-driven hazards.
Texas residents also have to deal with property taxes, which are the seventh-highest in the country, according to the Tax Foundation. As the state has no income tax, local governments rely heavily on property taxes, something that’s likely to continue.
Where Retirees Are Heading Instead
Texas and Florida still have their charms, and plenty of retirees move to these states every year. But with high costs and climate concerns raising some questions, other states that may not traditionally be “retirement magnets” are gaining ground. Here are some examples.
- Massachusetts: States like Massachusetts have recently ranked highly as destinations for older adults relocating for retirement, even edging out perennial favorites like Florida in some analyses. Massachusetts is a top destination for retirees crossing state lines, reflecting how priorities such as healthcare access, family ties or lifestyle can outweigh sunshine year-round.
- Midwest and Mountain regions: Less extreme weather, affordable housing and strong healthcare systems are drawing retirees to areas in the Midwest and Mountain West. These regions often offer predictable costs and amenities supportive of aging in place, even if they don’t boast tropical beaches.
- Secondary Southern states: Places such as Tennessee, North Carolina, Arkansas and other less-densely populated Southern states are desirable for providing tax advantages while avoiding some of the extreme climate risks seen on the Gulf and Atlantic coasts. These quieter locales are attracting retirees seeking a balance of affordability and lower environmental volatility.
- College towns and regional hubs: Cities anchored by universities or robust healthcare networks, such as Madison,Wisconsin, Chapel Hill, North Carolina, and Iowa City, Iowa, also appeal to retirees. They combine access to quality medical care, cultural attractions and moderate living costs, making them increasingly popular among older Americans.
Before you make such an important decision, however, ask yourself these fundamental questions:
- Can I budget reliably year to year, even with spiking insurance prices?
- Is quality healthcare easily accessible?
- Will my home be insurable and retain value over time?
These are questions many retirees overlook in favor of the more obvious ones, such as, “Will I enjoy living in this state?”
The Bottom Line
On its surface, it makes sense that retirees would be attracted to states like Texas and Florida. In addition to having no state income tax, these states have reputations for being “cheap” and having abundant sunshine. But that’s not the whole story. High costs, including homeowners insurance and property taxes, are pushing some retirees to different locations, such as North Carolina.
The bottom line is that in this evolving landscape, retirees are broadening their horizons, along with their definitions of what makes a state truly affordable for retirement.
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