10 states where retirees pay the least on fixed income

Geography does more work than savings for most retirees living on a fixed benefit check. A monthly Social Security payment buys a very different life in Jackson, Mississippi than it does in Boston or San Jose. Three things drive the gap: whether the state taxes benefits, what housing costs, and how far everyday expenses sit from the national average. The cheapest states to retire on Social Security are the ones where all three line up at once.

State tax policy has shifted in retirees' favor over the past decade. Most states no longer tax Social Security benefits at all. Several — West Virginia, Missouri, Kansas and Nebraska among them — have ended or nearly finished phasing out that tax since 2024, as legislatures moved to keep older residents from leaving. A no-tax-on-benefits rule is no longer a point of difference. It is close to the baseline.

What still separates states is cost of living, and within that, housing. Rent and property taxes are the largest line item in most retirement budgets. The spread between the least and most expensive housing markets in the U.S. runs to hundreds of dollars a month. On a fixed income, that gap is the whole budget. Property tax rates, insurance exposure to hurricanes or tornadoes, and heating and cooling bills tied to climate all layer on top.

One caution about the 2027 framing: no federal or state agency has published benefit amounts, median rents or cost-of-living indexes for that year. Anyone quoting precise 2027 figures is guessing. This list is built instead on structural factors that rarely reverse — statutory tax treatment of retirement income, property tax rates, and housing-cost rankings that have held for years.

The 10 states below work as starting points for research rather than a ranked verdict. Each carries tradeoffs, usually around rural healthcare access or insurance costs. Those matter as much as the price of a house.

Illustration: Quartz

Mississippi combines the lowest overall cost of living in the U.S. with a state income tax code that leaves retirement income almost entirely alone. Social Security benefits are exempt, and so are qualified withdrawals from pensions, 401(k) plans and IRAs once a retiree meets the plan's retirement conditions.

That second exemption is what many other low-cost states lack. A retiree in Mississippi can supplement a benefit check with regular draws from a modest nest egg and owe no state tax on either stream. The Missouri Economic Research and Information Center's cost-of-living index, which compares grocery, housing, utility, transportation and healthcare prices across states, has placed Mississippi at or near the bottom for years.

Housing drives most of that gap. Median home prices in the state rank among the lowest in the country, and effective property tax rates sit well below the national average — a detail that matters for anyone who owns a house outright and has only the annual tax bill left to cover. Hattiesburg and Tupelo price lower than the Jackson metro while keeping grocery chains, pharmacies and regional hospitals within a short drive.

Healthcare is the clearest tradeoff. Mississippi has fewer physicians per capita than most states, and specialized care concentrates heavily at the University of Mississippi Medical Center in Jackson. A retiree managing a chronic condition should map the drive to the nearest specialist before committing to a rural county.

Insurance is the second tradeoff. Gulf Coast counties carry hurricane exposure, and homeowners premiums there have climbed enough to cancel out part of the savings on the purchase price. Quote coverage for a specific address rather than assuming a statewide average applies.

Summers run long, hot and humid, which pushes cooling costs up from roughly May through September. Winters stay mild, so heating bills remain small. For a household living mostly on a Social Security check, the state's math works — provided the healthcare access and the insurance quote both hold up.

Illustration: Quartz

Social Security benefits are fully exempt from Kentucky income tax, and the state excludes a set amount of other retirement income — $31,110 per person, per year — from taxation as well. Each spouse on a joint return claims that exclusion separately, so a couple can shelter a substantial share of pension or IRA income before owing state tax.

The exclusion covers distributions from pensions, annuities, 401(k) plans and IRAs. Anything above it falls under Kentucky's flat individual income tax, which lawmakers have reduced in stages from the 5% rate set in 2018. A retiree living on a benefit check plus modest withdrawals often ends up owing little or nothing to the state.

Housing carries the rest of the math. Bowling Green, Owensboro, Paducah and Elizabethtown all sit below the national median home price, and Lexington costs less than most metro areas of similar size. Louisville, the state's largest city, offers big-city hospitals, an airport and a full arts calendar at prices well under those of coastal metros. Rents in the smaller cities run below national averages as well.

Property taxes come in under the U.S. average, and homeowners who reach 65 qualify for a homestead exemption that subtracts a fixed amount of assessed value from their tax bill. Kentucky resets that figure every two years to track inflation. The break applies to a primary residence, not to rental or vacation property.

Healthcare concentrates in Lexington and Louisville, home to UK HealthCare, UofL Health, Norton Healthcare and Baptist Health. Eastern Kentucky's rural counties have far fewer specialists, and some communities there sit in creek and river bottoms where flooding recurs — a factor in both insurance pricing and where buying makes sense.

Winters are moderate compared with states farther north, which holds heating bills down, while summer humidity pushes cooling costs up. A retirement-income exclusion, low property taxes and affordable housing in both small towns and midsize cities keep Kentucky workable as a fixed-income base.

Illustration: Quartz

South Carolina exempts Social Security benefits from state income tax and adds a second break on top: a retirement-income deduction that grows once a resident turns 65. Qualified retirement income — pension payments and withdrawals from 401(k) and IRA accounts — can be deducted up to $3,000 a year before 65. At 65 and older, the cap rises to $10,000. Military retirement pay is exempt in full.

That structure helps retirees drawing on several income streams rather than a benefit check alone. The legislature has also cut the top marginal income tax rate in stages in recent years, which trims the bill on whatever income sits outside the exemptions.

Property tax is the state's other advantage, and it is a large one for homeowners. Primary residences are assessed at 4% of market value, against the 6% applied to second homes and rental property. The Homestead Exemption then removes the first $50,000 of fair market value from taxation for homeowners 65 and older. Owner-occupied housing ends up carrying one of the lowest effective property tax burdens in the U.S.

Location choice matters more here than in most states on this list. Charleston and the Myrtle Beach corridor have absorbed years of retiree and tourist demand, and home prices there run well above inland South Carolina. Columbia, Spartanburg, Anderson and the smaller towns of the Upstate and Midlands offer identical tax treatment at noticeably lower housing costs.

Hospital access concentrates around the Medical University of South Carolina in Charleston and Prisma Health's systems in Columbia and Greenville. Rural counties in the Pee Dee and along the southern border have fewer specialists, which can mean long drives for specialty appointments.

Insurance is the coastal expense a listing price never shows. Hurricane exposure pushes homeowners premiums and separate wind-and-hail coverage higher in coastal counties, and those quotes vary by address rather than by county. Anyone weighing a Charleston-area house against one in the Upstate should price the coverage on the specific property before treating the two as equivalent.