4 Most Affordable States to Retire in 2023

The number one question you should ask as retirement approaches is, “Where can you afford to live?” Given that 78% of Americans don’t have enough saved for retirement, trying to stretch any saved dollars will become critically important as you transition to a fixed income. So, if you’re dreaming of turquoise water and seashell-speckled beaches, you might need to readjust your expectations. Popular retirement destination Florida did not make the top ten affordable states to retire.

Prioritizing affordability in retirement 

What makes a state or a city a great retirement destination is a combination of factors that partially rely on what you’re looking for. The most prevalent element in where to live in retirement is usually family-driven. One report found that 25% of baby boomers who moved did so to be closer to their families. Part of it was wanting to be involved in their grandchildren’s lives and have someone there to look after them as they age in place. 

But for those with a greater choice and flexibility in where to set down in retirement, finding an affordable place to live is a primary consideration. 

It’s not a simple calculation, but Bankrate tackled it. For its analysis, the site heavily weighted affordability while pulling statistics relevant to retirement. Cost of living and housing affordability represented 40% in its evaluation. Other factors included quality of healthcare (20%), crime rates (5%), and overall well-being (25%). 

Since the cost of living and housing affordability are key concerns for the long-term golden years, this list reveals where your nest egg will stretch further. The list may surprise you.

Where it’s Affordable to Retire

Iowa

The Midwest, you may say? A state with more cows than people? The truth is its low population has driven down its cost of living, making Iowa the best state to retire in terms of affordability. 

Based on the Council For Community and Economic Research (CCER), Iowa is the eighth cheapest state for 2023. Its low housing costs came in at a median of $239,400, almost $150,000 less than the median price nationwide. 

 Housing costs were a significant factor in cost savings. Bankrate’s survey cited Iowa’s low homeowner’s insurance premiums, property, and sales taxes. Its healthcare costs also fell on the more affordable side of the spectrum. 

The state’s estimated cost of living per month came to $1,512, including housing. Social Security distributions aren’t taxed here, either. 

West Virginia

The Mountain State has some of the best living costs in the nation. It combines low housing costs, a generous taxing policy, and a lower cost of living about 10% below the national median. Keep more income in your pocket with no Social Security state income tax. 

The only caveat on the cost of living in retirement in West Virginia is it really depends on where you live. If you’re in the more rural areas, you may spend a little more on your essentials, health care, and transportation. Consistent access to quality health care is another statewide challenge.

But on the upside, your days will be packed and busy if you’re an outdoor enthusiast. West Virginia is prime territory for hiking, biking, fly fishing, and outdoor sports.

Missouri

Missouri is another highly affordable state, ranking no. 7 in 2023. Housing costs ran 20% below the national average and made the state an overall 10% cheaper than elsewhere. It has some tax breaks on Social Security and pensions, but it’s not as generous as those that don’t tax those funds. 

It’s not the first time Missouri has been highlighted as a low-cost place for retirement. US News and World Report also noted that it was among the best places to retire with under $400,000, particularly in the state capital, St. Louis. The abundance of small towns makes it easy to enjoy retirement on a budget while living in a friendly place rich in culture and activities. Pick between the big cities, like St. Louis or Kansas City, that have access to health care and entertainment. At the same time, the Ozarks are a beautiful region for enjoying outdoor activities.

Mississippi

Fifth-ranked Mississippi scores well for affordability, particularly in housing. CCER data from the second quarter of 2023 had the state no. 1 for its overall cost of living. Nearly every category was under the national median, with its overall housing cost about 30% cheaper.

And, as long as you meet the requirements of your retirement plans, your pension income may be exempt from state income tax. Nor does it tax Social Security. 

Mississippi has some drawbacks, particularly with its poverty, crime, and healthcare quality. You can find great places to live here with some planning and care. Depending on your financial situation, it may even be possible to retire close to a waterfront on a budget, like Biloxi or Ocean Springs.

Delaware and affordability

The Diamond State also made Bankrate’s list, primarily because of its high well-being scores and generous property tax policy. But, if you solely look at affordability, Delaware doesn’t make the cut, falling to no. 31.

However, Oklahoma and Kansas are other potential top contenders for affordable states to retire based on living costs. Affordability is just one factor in picking a place to live in retirement. Their access to health care, transportation, or entertainment usually causes them to rank lower as a retirement state despite low expenses and affordable housing.

The worst states to retire

Pick the states with the most expensive housing markets, and you’ve got the conditions that are also the least affordable states to retire. 

If New York, Massachusetts, and California come to mind, you’d be on the nail. Rounding out the list are Washington state and Alaska, dinged for its cold weather to be ranked last by Bankrate. Each of these bottom states is struggling with some economic crisis, whether high prices from inflation or a crushing housing shortage driving up real estate prices. Either way, living on a fixed income is more challenging in these states unless you’ve already paid off your housing.