Social Security is designed to provide a monthly income stream upon retirement to replace a part of the earnings during your working years. It was never intended to be a complete source of retirement income.
Many Americans, however, rely heavily on Social Security benefits to cover day-to-day expenses. If you’re among this group of people, then moving to a low-cost state may be ideal. So, what are the best states to retire on Social Security?
In this article, InvestmentNews ranks the top states where your Social Security checks can stretch the farthest. To come up with the list, we analyzed various metrics, including cost of living, taxes, and healthcare expenses. These are the states that came up on top.
Retirees consider a range of factors when deciding where to settle down. Some prefer year-long sunshine. Others prioritize recreational amenities. But if you’re relying mostly on Social Security and want to stretch your monthly retirement checks, you may be more concerned with the financial aspects.
For our rankings, we considered several factors to help give you an idea of how much it will cost to live in a certain state:
These are the 10 best states to retire on Social Security based on our research.
Cost of living: $2,123
Income tax: Exempt
Average monthly rent: $682
Healthcare cost rating: 20.20
Arkansas’ average cost of living is lower than most states, allowing retirees to stretch their Social Security checks. Food and miscellaneous spending – which includes clothing, personal care items, and utilities – cost around $637 per month. Transportation costs average $311 ranking in the upper half of the index. Average monthly rent, meanwhile, is among the cheapest in the nation.
Arkansas, however, has one of the highest cost ratings in the elderly care rankings. This means that seniors living there spend more on average for medical care. This includes medications, doctor visits, hospital stays, and long-term care.
But Arkansas’ relatively tax-friendly laws can be a plus for retirees. Social Security is exempt from state income tax. Seniors also get a $6,000 deduction for other types of retirement income. While Arkansas’ sales taxes are among the highest in the country, this is partly offset by its low property taxes.
Cost of living: $2,126
Income tax: Exempt
Average monthly rent: $718
Healthcare cost rating: 9.56
One of the best states to retire on Social Security, West Virginia’s cost of living is lower than the index’s national average of $2,258. Monthly food and miscellaneous expenses are at $625 while transportation costs are at $279, both figures are among the cheapest in the country. Average rent goes for $718 per month, higher than those in most states.
West Virginia logged in the lowest healthcare cost rating in our ranking. This means it is one of the most affordable states for elderly care. But when quality and access are considered, the state lags at the back of the pack, ranking 46th overall.
For those relying mostly on Social Security, West Virginia is one of the tax-friendliest states. A portion of the Social Security retirement benefits that are taxed federally aren’t taxed in West Virginia. The state also has very low property and sales taxes, allowing retirees to stretch their retirement checks further.
Cost of living: $2,150
Income tax: Exempt
Average monthly rent: $733
Healthcare cost rating: 17.23
Kentucky has a lower cost of living than the national average, allowing monthly retirement payouts to go farther. Groceries, utilities, and other expenses cost about $640 monthly, while transportation costs average around $303; both among the cheapest in the country. Monthly rent is slightly above the median rate, but at $733 can still fit the budget.
Kentucky ranks in the middle of the pack when it comes to elderly care costs. The state, however, is at the bottom 10 when healthcare access and quality are accounted for.
Considered as a fairly tax-friendly state for retirees, Kentucky doesn’t tax Social Security. Other types of retirement income are also tax exempt, as long as the total doesn’t exceed $31,110 per person. The sales tax rate in the state is 6 percent. This is below the national average and much lower than those of other states in the region. Retirees can also benefit from below average property taxes.
Check out this guide if you want to learn more about how Social Security benefits work.
Cost of living: $2,171
Income tax: Exempt
Average monthly rent: $767
Healthcare cost rating: 19.38
Retirees relying mostly on Social Security can find Missouri as a good place to settle down with the cost of living lower than the national average. Groceries, utilities, and household items cost around $652 each month. Average transportation costs are also one of the lowest in the country at $290. The monthly rent of $767, while higher than those in most states on our list, is still quite affordable.
When it comes to elderly care, however, Missouri is in the more expensive half, with a cost rating of 19.38. The state is in the middle of the pack, ranking 33rd, when healthcare access and quality are considered.
On a positive note, retirees are no longer taxed for Social Security income. A tax cut passed in 2023 removed the income limits that previously determined who had to pay state taxes.
Cost of living: $2,172
Income tax: Exempt
Average monthly rent: $764
Healthcare cost rating: 14.72
Alabama is one of the cheapest states to retire if you’re on Social Security, with the cost of living below the index’s national average. Groceries and miscellaneous spending are also among the lowest in the country at $625 a month. Monthly transportation cost is $304. While this ranks in the upper half of the index, it’s still quite affordable.
The state also has one of the lowest healthcare costs, getting a score of 14.72, which is the eighth cheapest. Overall, however, Alabama got a 39.30 rating, good for only the 44th place when healthcare access and quality were also considered.
Alabama doesn’t impose taxes on Social Security and income from government pensions. Retirement accounts, such as a 401(k) plan or an IRA, however, are taxed as regular income.
Check out this guide if you want to learn everything you need to know about 401(k).
Cost of living: $2,174
Income tax: Exempt
Average monthly rent: $765
Healthcare cost rating: 20.03
Ohio’s low cost of living makes it one of the best states to retire on Social Security. Monthly spending on food, household items, and utilities just average about $658. Transportation costs are around $287 each month, among the lowest in the country. The average rent is $765 per month, one of the highest on our list, but can still fit the budget.
Senior healthcare costs in Ohio are more expensive than in most states. Its elderly care affordability rating ranks 42nd overall.
However, those who rely heavily on Social Security can benefit from the state’s retirement tax system. Unlike other sources of retirement income, Social Security isn’t taxed in Ohio. Retirees who spend money on necessities and non-tangible services like movies should have a smaller tax bill as these are tax-exempt.
Cost of living: $2,178
Income tax: Exempt
Average monthly rent: $1,079
Healthcare cost rating: 18.48
The cost of living in Indiana falls below the national average, which is a plus for retirees looking to stretch their Social Security checks. While average rent is among the most expensive, the cost of groceries and other household items are relatively lower at $697 per month. Monthly transportation costs are also cheaper than in most states at $279.
Elderly care is more expensive than average, based on the state’s cost ratings. Combined with accessibility and quality, Indiana is in the lower half of the rankings.
Social Security is not taxed in Indiana. Other types of retirement income are taxed at the state rate of 3.05 percent. And while there are no local sales taxes, the state rate of 7 percent is relatively high. Fortunately, this rate doesn’t apply to food, prescription drugs, and medical equipment.
Cost of living: $2,195
Income tax: Exempt
Average monthly rent: $842
Healthcare cost rating: 16.68
Retirees may find Louisiana’s low cost of living attractive. It has the cheapest food and other expenses among the states on our list, averaging $623 per month. Transportation cost is also one of the lowest at $295 monthly. The average rent, however, costs higher than in most states in our rankings.
Louisiana ranks in the upper half of the elderly care cost rankings at 21st. But it’s in the backend where healthcare access and quality are considered, landing at the 47th spot.
Social Security benefits, along with other public pensions, are exempt from income taxes in Louisiana. The state also has the lowest property and sales taxes at 0.55 percent and 4.45 percent, respectively. These tax benefits are a plus for retirees relying mostly on Social Security for their daily expenses.
Cost of living: $2,196
Income tax: Exempt
Average monthly rent: $749
Healthcare cost rating: 16.52
With low cost of living, Social Security payouts can go far in Oklahoma. Groceries, utilities, and household spending cost around $652 while transportation expenses are just $293 monthly. The average monthly rent is $749, a rate that’s still affordable.
Healthcare costs for seniors rank in the lower half of the elderly care ratings but are at the bottom when accessibility and access are considered.
In terms of taxes, Oklahoma is among the best states to retire on Social Security as the benefits are tax-exempt. The state’s sales tax rate of 4.45 percent is below the national average, although local city and county rates can be higher. The tax rate applies to groceries, but low-income households can claim a tax credit to offset the cost.
Cost of living: $2,204
Social Security tax: Exempt
Average monthly rent: $744
Healthcare cost rating: 18.40
Mississippi can be another attractive option for seniors who want to stretch their Social Security checks. The cost of living in the state is lower than the national average. The monthly costs of groceries and other household items are also among the cheapest at $639. Monthly transportation expenses average around $303, still an affordable rate. The average monthly rent is $744, relatively higher than the other states on the list, but still reasonable.
Mississippi is at the lower half of the elderly care cost rankings and near the bottom when quality and access are accounted for.
On the upside, Mississippi has one of the most generous exemptions for retirement income of any state. The exemptions apply to Social Security benefits, pensions, IRAs, and 401(k) plans. Sales tax rates are at 7 percent, with an additional 1 percent in Jackson. This applies to groceries. Prescription drugs are exempt.
Here’s a summary of the 10 best states to retire on Social Security based on cost of living:
Choosing where to retire is a personal decision that requires careful planning and preparation. Due diligence is even more important if you’re relying mostly on Social Security to meet daily expenses. If you’re having a hard time arriving at a decision, it’s best to consult an experienced financial advisor.
Our Best in Wealth Special Reports page is the best place to find one. The companies and individuals featured in our special reports are recognized as respected and reliable industry leaders. By partnering with these professionals, you know that you’re getting the right guidance in every step of your retirement journey.
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