Best States to Retire on a Budget in 2024

After years of inflation and economic turmoil, the cost of living crisis in America has reached a tipping point. Higher prices for everyday items such as housing, gas, groceries and electricity have impacted all Americans, but perhaps none more so than America's seniors. Especially those who live on fixed incomes.  

Americans 65 and older have the highest poverty rate of any age group at 14.1%, up from 9.5% in 2020 – according to the United States Census Bureau.

While inflation is thankfully beginning to cool, about 66 million Social Security recipients will receive an annual cost-of-living adjustment of 3.2%, a smaller increase than previous years.

With economic concerns at the forefront, seniors have to make smart decisions about where they want to retire. To help seniors understand the financial landscape, Seniorly analyzed the most recent data across 10 metrics in all 50 states and Washington, D.C related to housing, inflation, taxes, cost of everyday items, medicare costs, social security payments and more.

The complete methodology is at the bottom of this report. 

Key Findings

• Iowa is the Most Affordable State. Its high score was driven by a low median rent ($1,100, third-lowest), high SSI payments ($834 per month, fifth-highest), and because it does not tax retirement income for people over 55 – making it one of the most tax-friendly states for retirees. Iowa ranked well across the board.  
• California is the Most Expensive State. The state has the second-highest gas prices in the country ($4.62 per gallon, behind only Hawaii), the fourth-lowest homeownership rate among householders 65+ (73.2%), and fourth-highest median rent ($2,795). New York, Massachusetts, Washington, D.C., and Connecticut also landed among the most expensive places for retirees.
• Low Taxes, Gas Prices Buoyed Top 10 Most Affordable States. No. 5 South Dakota, No. 8 Wyoming, and No. 10 Utah had among the best rates for gas prices and tax-friendliness, while Wyoming also ranked among the best (fourth for homeownership among those 65+ (84.1%).
   

Most Affordable States

Iowa is the most affordable place for retirees in 2024. About 4 in 5 older adults own their homes, and the median rent is $1,100 – one of the lowest in the country. Kiplinger also considers Iowa among the most tax-friendly states for retirees, given it doesn’t tax retirement income for people 55 or older and has a property tax break for retirees. Iowa’s average SSI payment of $834 per month is the fifth-highest in the U.S.

New Mexico, Tennessee, Oklahoma, and South Dakota round out the five most affordable states to retire.  Interestingly, they all receive relatively low SSI payments. Oklahoma residents receive an average of $606 per month (No. 25 most) and the rest of the top five rank in the bottom half of states in this category. They, of course, make up for this in other areas. 

No. 2 New Mexico has the second-lowest electricity costs in the nation averaging $91 per month and the third-lowest medicare hospital spending when compared to the national average.

In No. 3 Tennessee, a strong 82.1% of seniors own their own and home values jumped 21.1% between 2021 and 2022, the second-most in the nation.

Oklahoma came in at No. 4 spending an average of $226 per month on groceries – the lowest amount in the U.S., and inflation increased costs by $733 per month – the second lowest.  

No. 5 South Dakota has the fifth-lowest average rent ($1,143) and grocery bills ($250), and the sixth-lowest gas prices ($2.81 per gallon).

Most Expensive States

The most expensive states for retirees are marked by sky-high rents, low homeownership rates, and unfriendly tax policies. California is the worst offender, with gas costing a whopping $4.62 per gallon and inflation eating up $1,079 per month. However, to help offset some of these costs, California also has one of the highest average SSI payments in the country, at $780 per month.

Rounding out the five most expensive areas are New York, the District of Columbia, Massachusetts, and Connecticut, largely due to their high costs of living and housing. Massachusetts has the highest median rent in the U.S. ($3,200), and New Yorkers have seen only 8.6% growth in their median home value, a sluggish rate compared to the rest of the country. Washington, D.C., has the lowest homeownership rate for the 65+ crowd (60.2%) and high gas prices at $3.39 per gallon. Finally, Connecticut’s monthly electricity bills are about $176, higher than every state but Hawaii ($222).

Best and Worst States in Every Category

Looking Ahead: Home Ownership, Affordable Housing and Senior Living

As we look ahead to the next 10 years, making sure seniors have a comfortable place to live is of paramount importance. Comfortable housing can include aging in place where they live or being able to afford quality care at a senior living facility. America will age dramatically in the years to come and the number of households led by someone in their 80s is expected to double by 2040. 

Home ownership has historically been a primary source of wealth for older Americans. On the positive side Baby Boomers made up 39% of homebuyers in the U.S. in 2023, according to the National Association of Realtors. 

However, due to recent economic challenges, a record 11.2 million older adults are also cost-burdened, meaning more than 30% of their household income went to housing costs, according to a 2023 report from Harvard University’s Joint Center for Housing Studies. 

There is also an affordability crisis for seniors who need to live in a senior living community. According to Seniorly's data, the average American needs to save for 17.2 years to afford one year at an assisted living facility. The average monthly cost of assisted living grew to $4,401 in 2023, up from $4,057 in 2021 with costs increasing in 30 states during that time. In the 97 metro areas included in this Harvard study, just 13% of adults 75+ could afford the median assisted living facility in the area.

Conclusion

Seniorly’s analysis reveals significant disparities in retirement affordability across the U.S. By examining factors such as living costs, health care expenses, and tax burdens, we pinpoint where retirees can stretch their dollars further, as well as states where it might be tougher to get by. As retirees – as well as older adults considering leaving the workforce – decide where to settle down, these considerations can serve as a jumping off point to help them plan their golden years with financial confidence.

Methodology

We used the most recent data for ten metrics to determine the most affordable states to retire. We used a Z-score distribution to scale each metric relative to the mean across all 50 states and Washington, D.C., and capped outliers at +/-2. We multiplied some Z-scores by -1, given a higher score was negatively associated with being above the national average. That includes inflation, rent, electricity, gas and grocery bills, and Medicare hospital spending. A state’s overall ranking was calculated using its average Z-score across the ten metrics. Maryland was missing Medicare data, so its overall score was calculated using the remaining nine metrics. Here’s a closer look at the metrics we used:

• Share of householders 65+ who own their homes (Census Bureau, 2022)
• Median rent (Zillow, 2024)
• Growth in median home value (Census Bureau, 2021-2022)
• Average monthly home electricity bill (Energy Information Administration, 2022)
• Average per-gallon prices for regular gas (AAA, Feb. 2024)
• Average monthly grocery bill per capita (Bureau of Economic Analysis and Census Bureau, 2022)
• Tax-friendliness for retirees rating, converted to a 1-3 score, 2023 (Kiplinger)
• Average monthly Supplemental Security Income payment, federal and state combined (Social Security Administration, 2022)
• Monthly inflation costs (U.S. Senate, Nov. 2023 relative to Jan. 2021)
• Medicare hospital spending per beneficiary, relative to national average (Centers for Medicare & Medicaid Services, 2022)