1. California
If you’re trying to retire in California, the biggest hurdle is the cost of living. Housing prices and rents are among the highest in the country, especially in coastal metro areas like Los Angeles and the Bay Area. Even everyday expenses like utilities, gas, and groceries tend to run above the national average. That means your retirement savings may not stretch nearly as far as you planned.
On top of that, California has a progressive state income tax with some of the highest top marginal rates in the U.S. While Social Security benefits aren’t taxed by the state, most other retirement income, including traditional 401(k) and IRA withdrawals, is. Property taxes are limited by Proposition 13, but high home values still translate into significant overall housing costs. Altogether, it can be hard to feel financially settled on a fixed income.
2. New York
In New York, retirement can feel expensive before you even factor in lifestyle. Housing costs are steep, particularly in and around New York City and its suburbs. Property taxes in many parts of the state rank among the highest nationally. That combination can put serious pressure on retirees who want to stay close to family.
New York does offer income tax exclusions for certain public pensions and up to a set amount of private retirement income for residents over age 59½. Still, the broader tax burden and high everyday costs can offset those benefits. Long-term care and assisted living services are also costly compared with many other states. For many households, that creates lingering anxiety about whether their savings will last.
3. Hawaii
Retiring in Hawaii often feels like paying a premium for paradise. The state consistently ranks among the highest in cost of living, with groceries and utilities far above mainland averages. Housing is a major strain, whether you rent or own, especially on Oahu and Maui. Those elevated day-to-day costs can steadily erode a fixed retirement budget.
Taxes add another layer of pressure for retirees. Hawaii taxes most retirement income, including distributions from traditional retirement accounts. Healthcare expenses also trend higher because of geographic isolation and supply costs. When essentials are pricier across the board, even careful savers may feel financially stretched.
4. Massachusetts
In Massachusetts, retirees often run into a high baseline cost of living. Housing prices, particularly in the Greater Boston area, remain well above national norms. Property taxes can be manageable compared to some states, but home values still drive overall expenses. Everyday costs like transportation and healthcare also skew higher.
The state taxes most retirement income, including pensions and retirement account withdrawals, though Social Security is exempt. That tax structure can surprise retirees expecting lighter obligations. Long-term care costs are also significant, reflecting regional pricing. Together, these factors can make retirement planning feel tight and unpredictable.
5. New Jersey
Retirement math can look intimidating in New Jersey because of its property taxes. The state regularly ranks near the top nationally for property tax burden. Even retirees who’ve paid off their homes still face sizable annual bills. That ongoing cost can strain fixed incomes.
New Jersey does provide retirement income exclusions that grow with age and income limits. Still, the broader cost of living — from insurance to utilities — runs high. Healthcare and assisted living expenses are also above average. For many retirees, maintaining financial stability requires careful budgeting.
6. Connecticut
In Connecticut, high living costs can make retirement feel less secure. Housing prices and property taxes are elevated compared with much of the country. Everyday expenses, including energy and transportation, tend to follow the same pattern. Those recurring costs chip away at retirement savings.
The state taxes certain retirement income, though exemptions have expanded in recent years for some residents. Even with those changes, retirees may still face a notable tax burden. Healthcare costs are also relatively high, reflecting regional pricing. All of this can create lingering financial pressure.
7. Illinois
Retirees in Illinois face a unique mix of advantages and concerns. The state does not tax most retirement income, which is a meaningful benefit. However, property taxes are among the highest in the nation. That ongoing obligation can outweigh income tax savings for homeowners.
Municipal finances and pension funding challenges have also contributed to uncertainty about future tax pressures. Local taxes and fees vary widely by county. Healthcare and housing costs in metro areas like Chicago can be substantial. Together, these variables can make long-term planning feel uncertain.
8. Alaska
Living in Alaska offers natural beauty but logistical cost challenges. Goods often cost more due to transportation and supply limitations. Heating and utility expenses can be significant, especially in colder regions. Those practical realities add up quickly for retirees.
Alaska has no state income tax, which helps offset some expenses. Still, healthcare access can be limited in rural areas, sometimes requiring travel for specialized care. Insurance and service costs also trend higher than average. Retirees must budget carefully to manage these structural costs.
9. Oregon
Retirement in Oregon can feel expensive despite the absence of a sales tax. Housing costs have risen sharply, particularly in Portland and surrounding communities. Renters and buyers alike face competitive pricing. Those housing pressures dominate many retirement budgets.
Oregon taxes most retirement income, including withdrawals from traditional retirement accounts. Combined with higher living expenses, that tax burden reduces net income. Healthcare costs also trend above national averages in urban areas. The result can be a tighter financial margin than expected.
10. Washington
At first glance, Washington looks appealing because it has no state income tax. However, retirees still encounter high housing costs, especially in the Seattle metro area. Property values have climbed steadily, influencing both purchase prices and property taxes. Everyday expenses follow a similar upward trend.
Sales taxes are relatively high and apply to many purchases retirees make regularly. Healthcare costs also reflect the region’s elevated pricing. Long-term care planning is especially important given those expenses. Without careful budgeting, savings can drain faster than anticipated.
11. Vermont
Retirees drawn to Vermont often love its small-town charm, but the financial realities can surprise them. Housing costs are high relative to local income levels. Property taxes contribute to ongoing ownership expenses. Heating and utility bills can also spike during long winters.
Vermont taxes most retirement income, though income thresholds influence Social Security taxation. Healthcare access in rural areas may require travel, adding indirect costs. Everyday goods can be pricier due to logistics. These combined factors can strain retirement budgets.
12. Rhode Island
In Rhode Island, retirees face a compact state with outsized expenses. Housing prices remain elevated, especially in coastal communities. Property taxes vary by municipality but can add meaningful annual costs. Day-to-day living expenses trend above the national average.
The state taxes certain retirement income, though exemptions exist depending on income and age. Healthcare and long-term care services are comparatively expensive. Insurance costs also run higher than many retirees expect. Together, these pressures can make financial security feel harder to maintain.
This post Why Retirement Security Feels Elusive in These States was first published on American Charm.
