Did you know that 41 states currently do not tax Social Security benefits? Both Missouri and Nebraska decided to stop taxing Social Security benefits in 2024. Now that you know, it behooves all of us to retire to states with fantastic weather, great food, and amazing scenery when it's time to collect Social Security!
Taxes and ever-rising healthcare costs are the largest expenses for retirees. We might as well put some effort into controlling what we can control.
If we've already paid a large amount of FICA tax during our working years, doesn't it seem like robbery that we're getting taxed again once we get to collect? I, for one, refuse to let the government take more advantage of me in retirement.
States That Don't Tax Social Security
The vast majority of states — plus Washington, D.C. — do not tax Social Security benefits or offer sizable exemptions based on age and/or income. These states are:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Virginia
- Washington
- Wisconsin
- Washington, D.C.
- Wyoming
Interesting, here is a map from 2021 that highlights only 37 states did not tax Social Security benefits. It's great to see more and more states stop taxing Social Security benefits over time.
Why Not Just Move To A Cheaper State In Retirement?
Readers know I have a bias for West Coast living, after spending over 10 years living on both coasts. Living in a great state helps improve your lifestyle.
So if Social Security is your main source of income, why retire in Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, North Dakota, Rhode Island, Utah, Vermont, or West Virginia? These are the remaining states that tax Social Security benefits.
A lot of people will cite family and friends as a reason why they'll never leave. But come on, it's so easy to get on a bus and bring the whole entourage with you. Besides, the internet has made keeping in touch so much easier. Just fire up Skype or a Google video chat and you can see your loved ones for free in a matter of seconds.
Not only are many of the states that tax Social Security cold as hell during the winter, they are also hot as hell during the summer. Looking at the map above, it's clear the best states to retire in are California, Hawaii, and Florida. Oregon is not bad either given they don't have any sales tax.
Although one study shows that the wealthiest people reside in the East and South, I dare say the happiest people reside on the West Coast and Florida. Tack on the benefit of paying no Social Security tax, we'll all be Social Security millionaires when we retire!
Save On Social Security Taxes
You can spend your career living in the worst states for work and lifestyle, then you can relocate to the best states that don't tax Social Security benefits.
The amazing thing about Social Security is that most of the people who are under 40 that I talk to don't expect Social Security to be there when they retire. Frequently cited reasons are they'll either be dead before they can collect, or the government will simply reduce benefits down to nothing.
If you can reduce your expenses to a negligible amount during retirement, you could conceivably completely live off Social Security. Without debt, all you're really paying for is food, entertainment, health insurance, Federal taxes, sales taxes, and property taxes if you own. If you have a low income, you'll also qualify for Medicare or Medicaid.
Now imagine if you actually saved some money in a 401k or consistently contributed to an after-tax, low-fee digital wealth management account that produced compounded returns over several decades. You could live a pretty comfortable life while relaxing on the beach in one of America's loveliest states!
Invest In Real Estate To Grow Your Wealth
Investing in no income tax states and states that don't tax Social Security benefits is a wise move. Thanks to technology and work from home, there will be a natural demographic shift towards lower-tax states. The best way to benefit is to invest in real estate in these states.
To do so, check out Fundrise, my favorite private real estate platform. Fundrise runs private real estate funds that predominantly invests in the Sunbelt region where valuations are lower and yields are higher. Its focus is on residential and industrial commercial real estate to help investors diversify and earn passive returns.
Fundrise currently manages over $3 billion for nearly 400,000 investors. I've invested $954,000 in private real estate funds since 2016 to diversify my investments and make more money passively. After I had children, I no longer wanted to manage as many rental properties.
Another private real estate platform to consider is CrowdStreet. Crowdstreet is a marketplace that mainly sources individual commercial real estate deals from various sponsors around the country. This way, you have more customization to build your own select private real estate portfolio.
Make sure you diversify your portfolio and do your due diligence on all the sponsors. Look up their track record, their management, and whether they have had any blowups before. Although CrowdStreet screens the deals, you have to do your screening as well.
Both platforms are sponsors of Financial Samurai and Financial Samurai is a six-figure investor in Fundrise funds.
Recommendation To Build Wealth
Sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing.
I’ve been using Empower since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
Related: The Best States For Retirement
Sam, your information is incorrect. Michigan started taxing Social Security two years ago while giving $40K additional exemption for senior couples. This is peanuts for high NW retirees with large investment income.
Thanks for the note! Have updated the post. $40K exemption is pretty good given the average SS benefit is only around $25,000 a year. So $50K for a couple.
Maryland allows for a pension exclusion, the amount for 2023 was $36,200 (the 2024 Maryland Pension Exclusion amount is increased to $39,500). However, this pension exclusion does consider Social Security benefits. Maryland exempts Social Security from state income taxes. The tax load in Maryland has continued to decrease during retirement.
Talbot county Local Income Tax revenue for FY 2024 is based on a rate of 2.40 percent of the Maryland Taxable Income. Talbot county is in the top ten of per capita millionaires in America and same area described in the book Chesapeake by James Mitchener..
We retired in 2015 and kept our house in Talbot county Maryland. The 2024 rebuy $500,000 house/ $1800 property & school taxes = 278 years. The same house in 2000 rebuy $250,000/$1200 = 208 years. We grew up in Western NY rebuy is about 20 years or your social security at retirement.
Our strategy for retirement was to travel early using rentals. Currently in Waikoloa Beach Hawaii for 3 months of scuba and fun. I found that real research is necessary on where to live in retirement.
If you like the colorful Asian diversity and culture, there are many countries here where even a $1200/mo SS will go the distance and cover all your expenses. Keep your retirement savings or dividends for travel and home visits! Of course, you should be mentally prepared for the culture.
Hello, I came across this site and enjoyed all the comments people have made. I have been checking states that do not tax SS as I live in Kentucky and they do!! So got to move out.!
I am new to SS (last year) and this past tax season got taxed 480. !! So planning to move
next year. South Dakota and Wyoming are low cost of living and don’t tax but weather conditions can be questionable so not sure about them. I am 63 and single still having to work
so I have to look at the big picture really not interested in Florida. I am originally from New York
and too expensive to go back which is sad. It is my home (long Island). So I am looking at low cost and not taxing everything got any ideas let me know! Thank you
Interesting Post! Deciding where to live in retirement is really important!
Saw your table about “americans having an asset worth over $1M in retirement”. Just comparing, I did the same estimation to Brazilian Social Security System (my country), here government used to pay up to U$ 24k/year, but at new exchange rate, it dropped to U$ 12k. Here, also, interest rates are up to 6% a year (over inflation! That´s really good!), so, I can say a Brazilian in retirement has an asset worth around US$ 200,000.
A simple argument can be made that Social Security benefits should not be taxed at all.
Proceeds from an insurance policy for which you paid are not taxed, e.g. when you get an insurance check on a homeowner’s policy claim or a relative’s life insurance policy, it’s not taxable income. (Insurance proceeds are taxable when you didn’t pay for the insurance, e.g. medical or disability insurance paid for by your employer.)
Since FICA taxes are “Insurance” “Contributions”, you could argue that at least benefits based on the half you paid in as an employee – and all of what you paid in while self-employed – should not be taxed when you receive benefits.
I’m a 64 year old that has lived in Nebraska all my life. In two years I hope to escape the Taxes ( and the cold winters) and move to Arizona. It seems that there’s too many people on the west coast.
I grow up in CA and have been living in the East Coast for the last 10 years (NJ, CT & currently MA). Other than the winter, I enjoy the East Coast. However, I would like to move back to CA when I retired mainly because my family is there and the warm weather. As I get older, I have no desire to removing snow every winter.
I have lived in Kansas (birth to 2010) and now California (last 6 years). Moving back to Kansas to be close to family would easily overcome the difference in taxes. Also, the cost of living is much lower. I even live in Central California where the cost of living and property prices are reasonable. Thanks for pointing out a fact about Kansas that I previously did not know!
That being said, I am not sure I want to move back to the tornados and snow/ice all winter!
We’re planning on retiring in North Dakota and for the max tax rate you’re talking about 2% or so. That is significantly less (on all income) than most states. The cost of living is extremely low so the dollar goes much farther. We like to say the cold keeps the riff raff away and we plan on traveling a lot in the winter so the cold isn’t that big of a deal. Also you can dress for zero and windy. There is nothing I can wear at 90 and humid and be comfortable.
Hah! I like it. You are also the first person I’ve met who plans on retiring in ND so this is awesome. Hope you can continuing sharing your thoughts once retired there.
Tim says: “It seems like each stage requires more energy than the last due to less structure, opportunity, etc. Once we retire I think the energy needed to build a new circle will far outweigh any tax savings.” – See more at: https://www.financialsamurai.com/states-that-dont-tax-social-security-benefits/#sthash.QVJAxoJt.dpuf
I agree, Tim, that there are some things that are non-financial that have a huge impact–and relationships for me are key. My family all live close here in VA, and I love that the milestones, and even daily small joys of life are ones we share. If we lived far apart, it wouldn’t be that way– only holidays a couple of times a year. I also have friends that I’ve had for decades, and those friendships grow deeper each year. Just another 2 cents.
I live in Utah but grew up in Pittsbhurgh and went to school in Cleveland. I’m still a long way from retiring (still saving as much as I can per your advice) but I don’t think taxes will be a big factor where we end up retiring.
Between HS, College, Medschool, and residency my wife and I moved every 4 years. We made fantastic friends at every stage in our life but it takes a certain amount of energy each time to build up that tight circle each time. It seems like each stage requires more energy than the last due to less structure, opportunity, etc. Once we retire I think the energy needed to build a new circle will far outweigh any tax savings. Perhaps my opinion will change in 30 years, and perhaps my young kids are simply making me more tired then normal but I think I’ll pay the extra 2k to hang with my long-time friends vs trying to make all new ones.
Utah is also awesome, so there is that too. (c:
Next vacation is check out some other states in America. There’s a lot of upside from Pittsburgh, no offense to those who live there.
Utah is lovely. Worth comparing other places though.
Hadn’t occurred to me to worry about that but it certainly makes sense. No reason not to optimize that part of your life as well.
I would imagine family really does become the biggest factor. Mine is massive and except for me and 2 others, they all live within a 30 minute radius of Little Rock, AR. I can’t imagine most of them ever moving for taxes.
Is this a guest post? The writing and comments (that are listed as from FS) somehow don’t seem like they are from Sam…
Interesting feedback! In what ways is this post different? Whatever happened to the FMF site and new one?
A few ways:
1. The article writing seems less comprehensive and well-thought out — things I always expect from FS. For instance, why make such a big deal about SS taxes and hold up CA as a great place to live when we all know CA has far higher costs in many more impactful areas (such a income taxes, cost of living, and the like)?
2. The comments seem flippant and I’m used to longer, more thoughtful comments from Sam.
3. “My father in law lives in WV in a log cabin in the middle of the woods.” For some reason, I thought you were single.
4. “That is true. Although, I would for once like to experience California living before I die! Even if it was just for a year. I’ve been all throughout the country, and it really is very nice in some states.” Uh, don’t you already live in CA?
Maybe it’s just me, but this post seems “off” a bit. Perhaps I’m the one who’s off. That’s ok, I’m used to being that way. This piece just somehow struck me as different than what I was used to on so many levels.
FYI, FS is the only blog I still READ on a regular basis. I follow others, but this one I read. Like your stuff.
Excellent feedback. Honored you read my stuff on a regular basis.
As we move into the new year, my goal is to experiment with new styles. I don’t think every post should be about me telling others XYZ. I’d get sick of myself, and I think others would as well, even though they are here to read my opinion. Instead, I think it’s great to hear from the community too.
I personally didn’t know that 37 States did not tax Social Security. Did you? I also want to hear from readers from Utah, Colorado, New Mexico, Nebraska, Kansas, Missouri, Montana, North Dakota, Minnesota, West Virginia, Vermont, Connecticut, and Rhode Island and find out the positives of their respective states. There’s always something to learn from somebody.
The funnest thing now is running surveys and asking readers for their thoughts given the blog has grown to reach a lot more people.
* #4 – Speaking from another person’s POV who has never left their state to explore the country.
Also, ask yourself this one question: Why are you no longer publishing on FMF after so many years? Answering this question will help you answer your first inquiry!
** Good feedback on comments too. I’m going to try and comment less and use this time to just publish more.
Maybe comments like yours are the reason why you shut your own site down after so many years? They add no value to the subject of the post. Surely you can see the irony?
1. I did not shut down my site. It’s still there.
2. I was asking honest questions of Sam. I have read this blog since (almost) day 1 and know his voice. This seemed different. Sorry for asking an honest question.
3. Your comment really adds no value since the only intention is to be nasty. Congratulations. I hope you feel better about yourself.
In defense of FMF I too thought something was off (still do). The “visit California” thing was especially odd (and obvious), “speaking from another’s POV” without stating or implying that is also odd.
Not sure. Seems obvious to me that I’m from California and people understand this given I mention SF so much.
Again, good feedback on how I plan to change things a little for 2016. I don’t want to be bigger than my writing, and when people start commenting on topics that have nothing to do with the article, I think there’s no value in this. Maybe I should moderate more.
Care to share your thoughts on the topic and your background?
It seems the calculation of where to live upon retirement is much more complicated than simply looking at which states tax social security benefits, but it should be one of the criteria for comparison. A 50 state comparison of cost of living, property taxes and sales taxes and at what level SS benefits are taxed might be more helpful, but much more work. I didn’t know west coast home
I agree. Check out this post: The Best States To Retire, for a more comprehensive analysis.
This post focuses just on evil states that tax Social Security.
The tax on SS is not a large enough amount to change your residence for. If the max SS benefit is $63k annually, for example, CO currently allows you to exclude $24k of any retirement income (SS or non-SS). So you pay tax on $43k, and CO state tax is 4.63% or $1,990. Saving a couple grand a year isn’t going to make up for moving expenses, etc.
I see it as more of a bonus to incentivize you to move to another state if you want to go there already.
What about the principle of not getting taxed again after paying taxes to get the SS in the first place? I will have none of that!
My wife and I plan to take benefits as early as possible for two reasons. 1) 85% of the S.S. benefit is taxable beyond $24K/yr in earned income (this includes IRA, 401(k), 457(b), etc. withdrawals). 2) the ‘break-even’ for taking early benefits (62 at 70%) to our regular payout (67 at 100%) is age 78. Not only is the risk for an early demise removed for 15 years (not once, but twice for each of us), but we feel the utility value of a few hundred dollars a month in extra benefits after age 78 is lower than in earlier years. More info on the taxation of SS benefits here: https://www.bogleheads.org/wiki/Taxation_of_Social_Security_benefits
Your personal Social Security payout(s) can be determined here:
https://secure.ssa.gov/acu/ACU_KBA/main.jsp?URL=/apps8z/ARPI/main.jsp?locale=en&LVL=4
and you can perform different scenarios in which you work different durations or earn varying amounts. Talk about “means testing” has been around since the 1980s, and the problem with that concept is it provides a disincentive to save (in direct conflict with the 401(k) rule, IRAs, lower Capital Gains rates for investments, etc. and all the other government incentives to save) I think it is OK to plan for receiving S.S., but respect your opinion if you choose not to.
I hope you get your SS, and lots of it for as long as possible! Each paycheck you get will feel like Christmas. Like you’re finally winning from the government, whoo hoo!
In fact, I think I will be so determined to get some of my taxes back that I will be super motivated to eat right, exercise often, and live for as long as possible!
While Utah taxes SS income, most would be surprised as just how low the cost of living can be there. If you plan to enjoy the outdoors during retirement, there may not be a better place with so many world-class national parks as well as skiing, boating, camping and other recreational areas.
I agree that if you’re active and outdoorsy, there’s no better place than Utah! You can live on a ski mountain but within a 30 minute drive to the city and an international airport. In addition to really great skiing, mountain biking and trail running are also excellent, as is boating at Lake Powell. I’ve lived in California too, but Utah is better, at least for me.
I was surprised by Utah given how rich the Mormon Church is. Are there tax breaks elsewhere to make up for the SS tax?
Fascinating! I am not surprised at all that California taxes Social Security benefits. I love living here, but man we have the worst state when it comes to taxes. Of the states that don’t tax SS benefits, I think I’d have to choose New Mexico due to it being the farthest south and the warmest. I don’t like cold winters! Although the summers might be tough there and be too hot lol.
Oh ha, nevermind. I looked at the chart backwards lol. I falsely assumed at quick glance that more states WOULD tax versus not tax and since CA normally taxes out the wazoo for everything, I thought green meant the state does tax. Clearly I still have morning fog. :) I’m pretty shocked that California doesn’t tax.
Nah, only Utah, Colorado, New Mexico, Nebraska, Kansas, Missouri, Montana, North Dakota, Minnesota, West Virginia, Vermont, Connecticut, or Rhode Island are the evil double taxation ones for retirement!
Well, it’s time to get surprised, because you read the chart wrong. California does NOT tax SS. So, consider that one in the win column for you. :)
My father retired this past week. And we’ve talked about retiring in other states quite a bit. Born and raised outside of Boston, my parents have no desire to leave. It’s a combination of family, familiarity, and owning a home in a coastal town just north of the city. It’s far from ideal — tons of snow in the winter, high cost of living, etc. But that doesn’t seem to bother them. Retirees who choose to stay in states that tax social security probably have similar reasons, too. Money just isn’t everyone’s number one concern.
I totally get how it’s hard to get away from familiarity. Perhaps this is why we should uproot ourselves when we are still young to gain perspective. I’ve asked my parents whether they’d like to relocate to other places and they are warming up to the idea. But they are used to traveling their entire careers and lives.
I retired last year and decided to remain overseas (I was working overseas at the time). I personally chose Guatemala but obviously there are an infinite number of choices. Guatemala does not tax any overseas earnings and its cost of living is a fraction of the US. Most importantly for me is the climate – springlike year round in the mountains or summer like in the lowlands. Even Florida is much too cold in the winter (I lived in Miami for a couple of years).
I just might have to visit Guatemala next year! Thnx.
Despite all of the dysfunction due to corruption in Illinois and the resulting 66% income tax hike from ’11-’14, one tax break I’m surprised has remained is the retirement income tax break. Currently ALL, retirement tax income is tax-exempt. This means, for all intents and purposes, Illinois is comparable to Florida, Texas, etc in that you can retire there without paying state taxes. I’m not sure how long this will remain since Illinois’s first priority is to ensure the retirement security of its own workers through gold-plated pensions and not tax breaks for the remaining 90% of its population. Sweet home Chicago!
I donno Karim, as a 65+ year old person, I don’t know if my bones will work in the Illinois cold for half the year! It literally feels so much better playing tennis in Hawaii than in a colder state.
After spending 3 weeks in California last December, though, I’ll admit it was hard to come back to the Midwestern polar vortex in January. Cali living is no doubt pretty good, especially with the nice hiking and scenery. Can’t beat the food and the warm people of Chicagoland:)
PS: I met a lot of friends who’d moved out there in the last year. I was saddened to find they’d seen less of Cali than I had in my 3 week vacation! I’m guessing with the hectic work schedules and the competition for jobs it was hard for them to get away. Seems kinda sad you move out there and don’t get to see much of the place, though.
True that! The people in the Midwest are nice folks!
And if you get to take 3 weeks off in a row, you are truly blessed compared to many other American workers! What do you do?
At the time, I was working in the R&D department of a large snacks company. I supported factory tests so in between tests there wasn’t much going on. I liken it to a sprinters life where you would have very busy period where you would be expected to work crazy hours (going in at midnight on a Sunday for example) but you then had lots of periods in between where you would catch up on paperwork. Or like me, max out the travel time!
I’ve since changed jobs to a much smaller company as a manager. Although I love the independence and the chance to do different stuff, I really miss the long vacations at my last job. Can’t have everything, I guess:) Glad I made the most of it when I had the chance, though.
Colorado doesn’t tax the first $24,000 of social security income for people over age 65. I’m not sure this is where we will retire, but at least in the county where we live, property taxes and cost of living are very low. We have easy access to mountains and desert, so if you love outdoors, SW Colorado would be a great place to retire, at least while you’re still fairly active. You also get free skiing in Telluride once you are 80!
For my in-laws who are in Colorado, they would ever consider moving to a different state. For whatever they might save in taxes or other expenses, they would lose in emotional stress of being away from the familiar.
That is good to know about $24,000 being tax free in CO!
Can’t wait to do the double black diamonds at 80, and go off a cliff with a bang! Like Brodi in Point Break!
We are staying based in Washington. Good climate, cosmopolitan, lots of wilderness and military bases for tax free shopping.
We still plan to use geographic arbitrage to increase our spending power, but Washington is a good permanent resident state.
I’ve been tempted to set up residency in Washington for a while, for the primary fact of saving 10%+ in state income tax while renting, so I don’t get raped by property taxes there. What is the latest prop tax rate there?
Thanks to several bonds and levies, my effective rate is about 1.7 percent. Not bad seeing as my house is being assessed at less then 2/3rds it’s appraised value.
Services are also higher quality then many other cities I have lived like Honolulu. Western Washington is poised to become a less expensive San Francisco.
It is my understanding that in Washington, property tax rates are much higher on apartments (4+ unit buildings classified as commercial property) than on houses.
Most states have higher property taxes on rentals than on owner-occupied homes.
Your Social Security income will have higher purchasing power in places like Kansas and Missouri than in places like California and New York. For example, you can easily get a very nice 2 br apartment for something like 800 – 900/month in the Midwest. I would assume that in California or New York you can’t even get a closet ( or so I have been told). A nice 1br apartment could cost 600 – 700.
Actually if your family and friends are in those states (and assuming you are close to them), it is cheaper and more efficient to stay in KS/MO for the majority of the time, than moving to CA/NY.
That is true. Although, I would for once like to experience California living before I die! Even if it was just for a year. I’ve been all throughout the country, and it really is very nice in some states.
West Virginia resident here defending our beautiful state. My husband and I are 100% debt free through careful planning and live in a beautiful brick ranch on 8 acres of land. We able to save over 50% of our income and live well due to the low cost of living. WV has beautiful state parks, hiking, biking, white water rafting, skiing and other outdoor activities. Our state motto is mountaineers are always free and we live that lifestyle. Wildlife is abundant and you can supply your family with meat for the entire year from hunting and canning your garden vegetables.
We love to travel and maybe we will retire at the beach (my favorite) but these mountains get in your blood and you miss them when your gone. We feel like we have our own little slice of paradise here.
Love your blog, keep up the great posts!
“Mountaineers are always free.” I love that motto! What’s better than freedom?
My father in law lives in WV in a log cabin in the middle of the woods. I used to live in McLean and Williamsburg, Virginia. I know that feeling you are talking about!
Exactly, what is better than freedom, financial and otherwise.
If zombie apocalypse happens you better make tracks to your in-laws cabin, country folks will be the survivors! The bunker at the Greenbrier is no longer a secret but you can bet that WV is in the bug out plan if shit hits the fan in DC!
Speaking of Zombie Apocalypse… I was thinking of writing a post on this! Thanks for the reminder. I found a good graph to jam off of.