“Just Lookin’ for a Home”: Most- and Least-Expensive States to Live In
Updated: Mar 13
Readers of a certain age may remember the song about the boll weevil, recorded by blues and folk artist Leadbelly in the 1930s and made famous by Brook Benton in the early 1960s. Boll weevils feed on cotton buds, and a widespread infestation in the American South led to economic devastation in the 1920s and 1930s. In the humorous song, a farmer asks the boll weevil, “Why’d you pick my farm?” to which the insect replies, “I’m just lookin’ for a home.”
Some individuals, approaching retirement, may find themselves in a similar situation to the boll weevil as they consider places to settle where their retirement dollars will stretch farther. The situation is somewhat reversed, of course; instead of inflicting damage, these persons are hoping to avoid the depredations of high taxes on their retirement nest egg. For this reason, many spend time evaluating the tax situation in the various states they are considering for their retirement homes.
Often, the focus is on state income tax rates. Applying this rubric would rule out states with the highest personal income tax rates. California, for example, has a top personal income tax rate of 13.3%; Hawaii is in second place, with a top rate of 11%. In a way, it’s too bad that two states with such a wealth of natural beauty also have the highest income tax rates in the nation. On the other end of the spectrum, of course are those states with no personal income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
But are income taxes the only thing retirees should be concerned about? After all, states have to pay their bills, and unlike the federal government (which prints the money), they are generally forbidden from deficit budgeting. When imposts like sales tax, property tax, and other charges are taken into account, the picture changes somewhat. Texas, for example, has the highest property taxes in the nation, at a median rate of 1.81% of the value of your home and other property. By contrast, California collects a median rate of only about 0.74%.
What about sales taxes? Louisiana, for example, which has one of the lowest property tax rates in the country (a median of 0.18%) also has a sales tax rate of 10.02% when state and local charges are combined: the highest such rate in the country.
The financial website WalletHub has compiled the various taxes imposed by the states into a ranking based on total tax burden. According to these figures, when all taxes are taken into account, New York has the highest overall burden, at 12.79%, while Alaska shows up as the least expensive state, tax-wise, at only 5.1%. Other states near the expensive end of the list include Hawaii, Vermont, Maine, Connecticut, and Minnesota, while others near the least expensive end include Florida, New Hampshire, Delaware, Wyoming, and Tennessee. Obviously, different types of taxes create different burdens on each taxpayer, depending on the level of personal income and other socioeconomic differences.
But even that may not be the entire picture. Many other factors impact quality of life in retirement, including weather, crime statistics, general culture, social amenities, and other considerations. Plugging these elements into the calculation can yield a slightly different picture, as shown in the ranking of “Best and Worst States for Retirement” as compiled by Bankrate.com. Interestingly, in this ranking, Alaska comes out near the bottom on the desirability scale (think “winters”), while my birth state, Nebraska, is at the very top (think “friendly people”).
Clearly, approaching retirement brings many decisions that need to be made. As professional, certified, fiduciary wealth managers, our most important job is to provide you with the information and resources you need to make the decision that is right for your particular situation. In fact, we are duty-bound to provide advice and information that keep your best interest foremost in any course of action we recommend. To learn more about how our best-interest standard works for your benefit, click here. To make an appointment to receive more in-depth information, please contact us.