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Florida and Texas have long been popular destinations for retirees, especially those with higher incomes. In addition to offering year-round mild weather, both Florida and Texas have no state income taxes. They also generally have a lower cost of living than coastal states like New York and California.
But these so-called “cheap” states also have some financial drawbacks, leading 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 going instead.
Unseen costs in ‘cheap’ states
Apart from the lack of state income taxes in Texas and Florida, no states tax Social Security benefits or retirement income. For seniors living on pensions or retirement accounts, this clearly goes in the plus column.
But this lack of taxation does not tell the whole story.
Insurance costs are skyrocketing in both states. according to to insureFlorida now has the highest insurance premiums in the US, averaging $14,140 annually. And that’s when you can get insurance, too, as major companies like Progressive, AAA and Farmers have pulled back or even exited the Florida home insurance market. Insurify notes that a combination of factors are responsible for the high premiums in Florida, ranging from inflation and fraudulent claims to a large number of lawsuits and natural disasters.
Home insurance premiums are also skyrocketing in Texas. Per Houston ChronicleThe main reason is the increased 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. Since there is no income tax in the state, local governments rely heavily on property taxes, which is likely to continue.
Where are retirees going instead
Texas and Florida still hold their appeal, and many retirees move to these states each year. But with high costs and climate concerns raising some questions, other states that might 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 surpassing perennial favorite states like Florida in some analyses. Massachusetts is a top destination for retirees crossing state borders, showing how priorities like health care access, family ties or lifestyle can outweigh year-round sunshine.
- Midwest and Mountain Regions: Mild climates, affordable housing and strong healthcare systems are attracting retirees to areas of the Midwest and Mountain West. These areas often offer predictable costs and supportive amenities for aging in place, even if they do not have tropical beaches.
- Secondary Southern State: : Locations such as Tennessee, North Carolina, Arkansas and other less densely populated southern states are desirable for the tax benefits they offer while avoiding some of the extreme climate risks seen on the Gulf and Atlantic coasts. These tranquil locations are attracting retirees seeking a balance between affordability and less environmental instability.
- College towns and regional centers: Cities associated with universities or strong healthcare networks, such as Madison, Wisconsin, Chapel Hill, North Carolina, and Iowa City, Iowa, also attract retirees. They combine access to quality medical care, cultural attractions, and moderate living costs, making them increasingly popular among older Americans.
However, before making such an important decision, ask yourself these basic questions:
- Can I budget reliably from year to year even with rising insurance prices?
- Is quality health care easily available?
- Will my home be insurable and retain its value over time?
These are questions that many retirees overlook in favor of more obvious questions, like, “Will I enjoy living in this state?”
bottom line
On the surface, it makes sense that retirees would gravitate toward states like Texas and Florida. In addition to having no state income tax, these states are famous for being “cheap” and having abundant sunshine. But this is not the whole story. High costs, including homeowners insurance and property taxes, are driving some retirees to different locations, such as North Carolina.
The bottom line is that in this changing landscape, retirees are expanding their horizons, but they are also expanding their definitions of what makes a state truly affordable for retirement.