OVERVIEW
West Virginia, Mississippi, Indiana, Tennessee, Georgia, and Alabama stand out among the most affordable states for retirees in 2026. West Virginia offers the lowest median home price at $203,000 and has fully phased out its Social Security income tax. Mississippi, Alabama, and Tennessee exempt Social Security and most retirement income entirely, while Georgia allows married couples to exclude up to $130,000 in retirement income from state taxes.
When you’re retiring on a fixed income, location is one of the few variables you can control, and it can be worth tens of thousands of dollars over the years. Moving to the wrong state can chip away at your savings through high utility bills, insurance premiums, and taxes.
The six states below stand out for their ability to stretch a retirement budget further than most, thanks to favorable tax treatment of retirement income, affordable housing, or both. Each comes with its own trade-offs worth weighing before you call the movers.
West Virginia
West Virginia has consistently ranked among the cheapest states to retire in. In 2026, the Mountain State’s three-year phase-out of Social Security income tax became complete, exempting the benefit from taxation for every recipient regardless of income.
Housing is a major draw, with a median sales price around $203,000, the most affordable on this list. Unlike Social Security, pensions, 401(k), and individual retirement account (IRA) withdrawals are taxable, though residents 65 and older can claim an $8,000 deduction. Groceries and utilities both run below the national average.
Beyond the financial benefits, West Virginia’s terrain draws retirees who want easy access to the outdoors. New River Gorge, Blackwater Falls, and hundreds of miles of hiking and fishing trails are all within reach.
Mississippi
Mississippi is one of the more tax-friendly states for retirees, exempting Social Security, pensions, IRA distributions, and 401(k) withdrawals entirely from state income tax.
Housing is similarly favorable, with a median sales price of $241,155. One factor to watch is home insurance: Gulf Coast hurricane risk pushes premiums well above the national average, though costs run lower in inland counties less exposed to tropical storms.
Mississippi suits retirees who want mild winters and the slower pace of Southern coastal towns like Biloxi and Ocean Springs.
Indiana
Indiana has become a stronger retirement option since its flat income tax dropped to 2.95%, down from 3% in 2025. The rate is set to drop again in 2027, to 2.9%. There’s no income tax on Social Security, and no estate or inheritance tax, though Indiana’s 92 counties each levy their own income tax, making location within the state an important consideration.
A typical home in the state runs affordable, with a median sale price of $239,500. Groceries and utilities are both lower than the national average.
The Hoosier State pairs low costs with four distinct seasons and a cultural footprint that spans the museums of Indianapolis, the lakes in the north of the state, and a sports tradition that runs deep in Indiana communities.
Tennessee
Tennessee has one of the more straightforward tax pitches of any state. There’s no tax on Social Security, pensions, IRA withdrawals, or investment income, and no estate or inheritance tax. The trade-off: sales tax runs higher than in most states, and local add-ons push it higher still.
Homes in Tennessee carry a median sale price of $323,333, the second-highest on this list. Property taxes are reasonable, but severe storm risk pushes home insurance costs above the national average.
Despite the higher home costs, Tennessee’s climate and geography give retirees more lifestyle options within a single state. From the Smoky Mountains in the east to the Mississippi River in the west, the terrain varies widely. For retirees who prioritize low taxes over cheaper housing, it’s easy to see why so many people choose to retire in Tennessee.
Georgia
Georgia has aggressively overhauled its tax code in recent years, moving from a graduated system to a flat tax that now stands at 4.99%.
The bigger story for retirees is the retirement income exclusion. Social Security is fully exempt at any age. Taxpayers aged 62 to 64 can exclude up to $35,000 of additional retirement income, rising to $65,000 for those 65+. Married couples can exclude up to $130,000. For many retirees, this adds up to little or no state tax on retirement income.
Georgia homes run higher than those in Tennessee, making it the priciest state on this list for housing, with a median sale price is $328,467.
Alabama
Alabama doesn’t beat the cheapest states on this list for home prices, but it offers some of the lower housing costs in the South, with a median sale price is $244,967. Retirees won’t pay tax on Social Security or traditional defined-benefit pensions, and those 65 and older can exempt the first $6,000 of 401(k) and IRA distributions.
Insurance is the catch. The state’s coastal exposure pushes homeowners’ insurance well above the national average, and long, humid summers push utility costs a little higher than in other states on this list.
Areas like Fairhope, Daphne, and the region around Huntsville offer real value for retirees seeking Gulf access, mild winters, and a low overall cost of living.
Beyond the Numbers
Cost is only the starting point. Climate, health care quality, access to hobbies, proximity to family and friends, and the day-to-day experience of a place all matter just as much. A state that saves $4,000 a year in taxes but leaves you far from your grandkids and away from the activities you enjoy isn’t much of a bargain.
These figures are averages, and they vary depending on the specific location within a state and your personal financial situation. Insurance costs less in areas less prone to severe weather, and a retiree living mostly on Social Security will have a very different tax picture than one drawing heavily from an IRA.
Still, every state on this list offers real ways to stretch a fixed income further than most of the country. If you’re still weighing your options, here’s how to decide which state to retire in.
FAQ: Cheapest States to Retire In
What Is the most affordable state to retire in on this list?
West Virginia is the most affordable, with a median home sale price around $203,000, the lowest of the six states. The state also fully exempts Social Security income from state tax as of 2026. Groceries and utilities in West Virginia both run below the national average.
Is Mississippi a tax-friendly state for retirees?
Yes. Mississippi exempts Social Security, pensions, IRA distributions, and 401(k) withdrawals entirely from state income tax. Home insurance is the main cost to watch, since Gulf Coast hurricane risk pushes premiums above the national average in coastal counties.
What is Indiana’s state income tax rate for retirees?
Indiana’s flat state income tax rate is 2.95% for 2026, down from 3% in 2025, with a further drop to 2.9% scheduled for 2027. Social Security income isn’t taxed, and Indiana has no estate or inheritance tax. County-level income taxes still apply on top of the state rate.
Does Tennessee tax retirement income?
No. Tennessee doesn’t tax Social Security, pensions, IRA withdrawals, or investment income, and it has no estate or inheritance tax. The trade-off is a higher sales tax, which runs above the national average once local add-ons are included.
How much retirement income can be excluded from Georgia state taxes?
Taxpayers age 62 to 64 can exclude up to $35,000 of retirement income in Georgia, and that rises to $65,000 for those 65 and older. Married couples filing jointly can exclude up to $130,000 combined. Social Security is fully exempt from Georgia state tax regardless of age.
Are 401(k) and IRA withdrawals taxed in Alabama?
Alabama taxes 401(k) and IRA distributions, but residents 65 and older can exempt the first $6,000. Social Security and traditional defined-benefit pensions are fully exempt from state tax. Home insurance tends to run higher due to the state’s coastal hurricane exposure.
Why is home insurance more expensive in Mississippi and Alabama?
Both states carry Gulf Coast hurricane exposure, which pushes homeowners’ insurance premiums above the national average. Choosing an inland county with lower storm risk can meaningfully reduce this cost in either state.
Is Tennessee’s higher sales tax a bigger burden than income tax in other states?
It depends on spending habits and income sources. Tennessee’s combined sales tax rate runs above the national average, but retirees who don’t pay tax on retirement income already avoid the higher ongoing cost that income tax represents in most other states. For retirees who spend less and rely heavily on tax-exempt retirement income, Tennessee’s overall burden is often still lower.
Should retirees choose a state based on taxes alone?
No. Taxes are one factor, but climate, health care quality, proximity to family, and access to hobbies matter just as much for day-to-day satisfaction. A state that saves a few thousand dollars a year in taxes isn’t necessarily a good fit if it leaves you far from the people and activities you care about.
How do county-level taxes affect retirees in Indiana?
All 92 Indiana counties levy their own income tax on top of the 2.95% state rate, so the total tax burden depends heavily on where in the state you live. This makes it worth comparing counties directly rather than assuming a single statewide rate applies.
Do state tax rates and home prices change over time?
Yes. Tax rates, exemptions, and home prices in this article reflect 2026 figures and can change as new legislation passes or local housing markets shift. It’s worth confirming current rates and prices before making a move, especially in states like Indiana and Georgia that have multi-year tax rate reductions scheduled.
How do I find active adult communities in these affordable states?
55places.com lists active adult communities across West Virginia, Mississippi, Indiana, Tennessee, Georgia, and Alabama, along with pricing, amenities, and reviews for each one. Contacting 55places.com directly connects you with a local 55+ real estate expert who can help narrow down options based on your budget and lifestyle priorities.
Ready to Find Your Next Chapter?
The 55places team can help you find the retirement destination that fits your life, not just your budget or your ZIP code. Explore thousands of active adult communities across the country, or contact 55places.com today!
- Insights and market stats
- Instant new home alerts
- Answers from local 55+ experts
