10 tax-friendly places for early retirement

By Stacy Rapacon
Posted on April 06, 2021

Retiring at a relatively younger age may mean needing to stretch your nest egg further. One way to do that is to find the right retirement destination.

Where you live makes a big impact on your budget, as it helps determine your living costs, tax bills and income opportunities. Even if you retire, you may actually want to keep working a bit — whether to help pad your budget, pursue some passion project or just to stay busy.

We crunched the numbers in search of a great place in every state for early retirees to settle in, focusing on areas with lower living costs and favorable tax situations, both specifically for retirees. For the full list of locales, see bit.ly/50placestoretire.

Here is a varied selection of 10 such places:

Huntsville, Alabama

Total population: 444,908

Share of population age 45 to 64: 27.8% (U.S.: 26.1%)

Retired cost of living: 5.4% below the national average

Median income, age 45 to 64: $77,266 (U.S.: $69,909)

State’s retiree tax picture: Tax Friendly

As one of the 10 cheapest states to retire in, Alabama has many great spots for affordable living. And Huntsville, in northern Alabama, is one of the best. It offers all the low-cost, low-tax advantages as the rest of the state but with higher household incomes.

Home to NASA’s Marshall Space Flight Center, the Redstone Arsenal and the Huntsville campus of the University of Alabama, the city has a robust economy and a highly educated population.

You can find plenty of cultural attractions, from a sculpture trail to a symphony orchestra, as well as opportunities for outdoor recreation (think bass fishing).

In fact, Alabama offers many of Florida’s popular retirement attractions — warm weather, nice beaches and plenty of golf — all at a typically lower price.

Lake Havasu City, Arizona

Total population: 204,691

Share of population age 45 to 64: 28%

Retired cost of living: 0.2% below national average

Median income, age 45 to 64: $44,328

State’s retiree tax picture: Mixed

Lake Havasu City, situated on the eastern shore of a lake, is a popular spring break and snowbird destination — a testament to its attractiveness for a wide age range, making it a great choice for early retirees. Indeed, for the whole year, the local median age is 50.4, compared with 37.8 for the U.S.

The area offers boating, fishing and swimming, as well as scuba diving and water skiing. But it’s more than just fun and games: Lake Havasu City’s regional business growth and hot job market offer a strong economic base should you decide to un-retire.

Newark, Delaware

Total population: 33,673

Share of population age 45 to 64: 16%

Overall cost of living: 11.5%

State’s retiree tax picture: Tax Friendly

College towns typically offer strong economic bases and brilliant amenities.

In Newark, home to the University of Delaware, retirees may appreciate the vibrant campus lifestyle, which includes sports, concerts and other events open to the whole community, as well as numerous restaurants and businesses. As residents age, they may appreciate the university’s continuing-education offerings, as well as the quality healthcare facilities.

Plus, the First State is tax-friendly to residents of all ages, so young retirees don’t have to wait to take advantage of low taxes. Indeed, with no sales tax and low property tax, Delaware ranks among our top 10 Most Tax-Friendly States.

Tampa, Florida

Total population: 3 million

Share of population age 45 to 64: 27.3%

Retired cost of living: 9.3% below national average

Median income, age 45 to 64: $68,759

State’s retiree tax picture: Most Tax Friendly

You can find plenty of great places to retire in Florida, but this area ranked best for young retirees, due to its particularly affordable living costs and younger-skewing population.

Tampa is one of three major cities that make up the Tampa Bay area, which also includes St. Petersburg and Clearwater. The latter tends to be the most popular among seniors, who make up 21.4% of the population, compared with just 17.7% in St. Petersburg and 12.2% in Tampa.

The area offers all the things you’d look for in a Florida retirement: white-sand beaches, warm waters, golf courses and generous tax breaks.

Savannah, Georgia

Total population: 377,476

Share of population age 45 to 64: 24%

Retired cost of living: 9.8% below national average

Median income, age 45 to 64: $68,759

State’s retiree tax picture: Most Tax Friendly

With its warm weather and low living costs, Georgia ranks third among our Best States for Retirement. And Savannah is particularly peachy, especially for early retirees. Living costs among retired people are among the lowest in an already low-cost state.

The historic city offers beautiful sights, including classic American architecture, town squares and riverfront views. You can enjoy an array of restaurants, museums and theaters in downtown Savannah.

Louisville, Kentucky

Total population: 1.3 million

Share of population age 45 to 64: 27.4%

Retired cost of living: 6.8% below national average

Median income, age 45 to 64: $65,005

State’s retiree tax picture: Most Tax Friendly

The biggest city in Kentucky, Louisville is a solid blend of metropolitan attractions, southern and midwestern charm and affordability.

Housing is particularly cheap, at 20.3% below the national average for retirees. The median home value in Louisville is $146,900, according to the U.S. Census Bureau, a bit pricier than the rest of the state (median: $130,000) but less than the national median of $193,500.

Along with the affordability, you can also enjoy plenty of cultural attractions in Louisville. One is the Kentucky Center for the Arts, which hosts traveling Broadway shows, operas and performances by the city’s professional ballet company and orchestra.

Oklahoma City, Oklahoma

Total population: 1.4 million

Share of population age 45 to 64: 24.1%

Retired cost of living: 13.9% below national average

Median income, age 45 to 64: $65,355

State’s retiree tax picture: Not Tax Friendly

The biggest city in the Sooner State charges residents little in living costs. Housing-related expenses are particularly affordable, at 27.3% below average. The median home value is $148,500, well below the nation’s median of $193,500.

Thanks to the area’s downtown revitalization effort, everyone can find something to enjoy. The Bricktown Entertainment District has a variety of restaurants and nightlife options.

And in neighboring Norman, the University of Oklahoma plays host to bigtime sporting and cultural events.

Pittsburgh, Pennsylvania

Total population: 2.3 million

Share of population age 45 to 64: 28.9%

Retired cost of living: 1% above national average

Median income, age 45 to 64: $70,254

State’s retiree tax picture: Most Tax Friendly

The Steel City is a good deal for your retirement. While overall living costs for retirees are slightly above average, housing and healthcare costs are decidedly below average by 1.7% and 6.4%, respectively. Indeed, the median home value is just $108,500, compared with $170,500 for the state and $193,500 for the nation.

Plus, the Keystone State offers some nice tax breaks for retirees: Social Security benefits and most other retirement income are not subject to state taxes.

The city offers museums, a ballet company, a plethora of jazz joints, and all the offerings of local universities, which include Duquesne, Carnegie Mellon and the University of Pittsburgh.

And if watching all the collegiate and professional sports isn’t enough activity for you, you have plenty of opportunities nearby to golf, hunt, fish, bike, hike and boat.

Knoxville, Tennessee

Total population: 862,490

Share of population age 45 to 64: 27.2%

Retired cost of living: 17.4% below national average

Median income, age 45 to 64: $58,303

State’s retiree tax picture: Tax Friendly

The Volunteer State is another good choice for budget-conscious retirees, with below-average living costs throughout the state and a friendly tax situation for all residents. It ranks fifth on our list of best states for retirement, but the tax advantages kick in well before normal retirement age with no broad-based income tax.

Housing costs for retirees in Knoxville are the biggest factor bringing down costs, at nearly 30% below the national average. The city’s median home value is just $124,500 versus $191,400 in Nashville and $193,500 across the country. Indeed, Knoxville is one of the cheapest U.S. cities to live in.

Sherman, Texas

Total population: 126,146

Share of population age 45 to 64: 26.8%

Retired cost of living: 14.3% below national average

Median income, age 45 to 64: $64,446

State’s retiree tax picture: Tax Friendly

This small Texas city offers big savings for retirees with below-average costs in every spending category. It’s actually among the cheapest U.S. cities to live in.

Housing costs are particularly cheap: 27.3% below the national average for retirees. The median home value in Sherman is $106,100, compared with $151,500 in Texas and $193,500 in the U.S.

In town, you’ll find boutique shopping, unique restaurants (and many more chains), and community events throughout the year, including a free summer concert series.

Nature lovers might also appreciate the local 12,000-acre Hagerman National Wildlife Refuge.