"No income tax" states may cost retirees more overall

Full analysis

CPA and retirement planning expert Geoffrey Schmidt analyzed the five best and worst states to retire by combining property taxes, sales taxes, income taxes, and property insurance into a single total cost figure — rather than focusing on income tax alone. His findings challenge the popular assumption that no-income-tax states like Florida are automatically best for retirees; in some cases, high property insurance costs (particularly in hurricane and tornado-prone regions) tip the total burden higher than states that do levy income tax.

Schmidt also showed that retirees in income-tax states often pay little or nothing in practice, because many states offer deductions and exclusions specifically for older residents. New Jersey, often cited as a high-tax state, exempts Social Security benefits from state income tax and allows most seniors to exclude up to $100,000 of pension income — including IRA and 401(k) distributions — from taxable income. The state also offers a property tax freeze for homeowners with household income of $176,870 or less, which covers the vast majority of retirees given that the median household income for those 65 and older in New Jersey is $69,102. The practical takeaway: before ruling out a state based on its headline tax rate, calculate the full annual tax and insurance load against your actual income and assets.