State-by-State Comparison of U.S. Retirement Benefits: 2025 Update
Retirement in the United States looks very different depending on where you live. While federal programs like Social Security and Medicare provide a baseline, each state overlays its own policies on taxes, benefits, and healthcare. In 2025, these differences have become more pronounced as states adjust their fiscal policies in response to aging populations, rising costs, and shifting economic dynamics.
Let’s take a closer look at how each state stacks up in terms of tax treatment, cost of living, state-level pension support, and healthcare access for retirees.
Taxes on Retirement Income: The Stark Divide
One of the most significant retirement variables is how states tax retirement income, including Social Security benefits, 401(k) withdrawals, and pension income.
| State | Social Security Taxed? | Pension Taxed? | State Income Tax? |
|---|---|---|---|
| Florida | No | No | No |
| California | No | Yes | Yes |
| Texas | No | No | No |
| New York | No (limited) | Yes | Yes |
| Illinois | No | No | Yes |
| Pennsylvania | No | No | Yes |
| Oregon | Yes (partial) | Yes | Yes |
- States like Florida and Texas remain tax havens for retirees, with no income tax at all.
- California taxes most pensions and retirement account withdrawals, which can be a drawback despite its otherwise generous benefits.
- Pennsylvania and Illinois exempt most retirement income but still have a flat income tax rate on other income.
In total, 12 states fully tax Social Security benefits, while 27 offer partial or full exemptions.
Cost of Living: High Sunshine, High Prices?
Retiring in a tax-friendly state doesn’t necessarily mean affordability. States like Hawaii and California offer beautiful weather and amenities—but they come with high housing, healthcare, and everyday living costs.
Most affordable retirement states in 2025:
- Mississippi
- West Virginia
- Arkansas
- Oklahoma
- Alabama
Most expensive retirement states in 2025:
- Hawaii
- California
- Massachusetts
- New York
- Washington
Interestingly, many of the states with lower taxes also have lower property prices and insurance costs, making them doubly attractive for retirees on fixed incomes.
State-Sponsored Retirement Plans & Pension Systems
Not every American has access to a workplace retirement plan. In response, some states have launched automatic IRA programs to help private-sector workers save for retirement.
| State | Auto-IRA Program | Mandatory for Employers? | Year Implemented |
|---|---|---|---|
| California | Yes (CalSavers) | Yes | 2021 |
| Oregon | Yes (OregonSaves) | Yes | 2018 |
| Illinois | Yes (Secure Choice) | Yes | 2018 |
| New York | Pilot phase | Soon | 2025 (full) |
| Texas | No | No | — |
States like California and Oregon are leading the charge, while others like Texas and Florida have no such mandates. This leaves many workers in those states without a clear retirement savings path if their employer doesn’t offer one.
Healthcare & Long-Term Care Accessibility
Another critical consideration is healthcare access and affordability, particularly for retirees who may need chronic care management or nursing facilities.
According to the 2025 U.S. News Healthcare Index for Seniors:
- Top 5 states for senior healthcare:
Massachusetts, Minnesota, Vermont, Connecticut, and Hawaii - Bottom 5 states:
Mississippi, Louisiana, Alabama, Oklahoma, and West Virginia
These rankings consider metrics like hospital quality, Medicaid coverage for long-term care, wait times, and senior wellness services. Even if a state has tax perks, poor healthcare access can negate the savings.
Best & Worst States to Retire in 2025
Factoring in taxes, affordability, healthcare, and general retiree satisfaction, here’s a composite ranking of the best and worst states to retire in 2025:
🏆 Best States to Retire
- Florida
- Pennsylvania
- South Dakota
- North Carolina
- Utah
❌ Worst States to Retire
- New Jersey
- California
- Alaska
- Louisiana
- New Mexico
Florida continues to top the charts for its mix of tax-friendliness, weather, and services geared toward retirees—despite rising insurance premiums.
What Does This Mean for Your Retirement Plan?
If you’re nearing retirement, relocating might not be top of mind—but it should be. The state you choose can materially impact your post-retirement income, cost of living, and quality of healthcare access.
Before moving:
- Run the numbers on tax impact across states.
- Consider proximity to family and healthcare providers.
- Review long-term care options and Medicaid eligibility in your potential new home.
- Investigate whether your pension or annuity is state-taxed.
FAQ: Retirement Benefits by State in 2025
Q1: Which states tax Social Security income in 2025?
A1: 12 states still tax Social Security, including Colorado, Connecticut, and New Mexico, though some are phasing out the tax.
Q2: Is there a federal retirement benefit that applies uniformly across states?
A2: Yes, Social Security and Medicare are federal programs, but how they’re supplemented or taxed varies by state.
Q3: Do all states offer state-sponsored retirement plans?
A3: No. Only a growing group—led by CA, OR, IL—mandate employer-facilitated Auto-IRAs.
Q4: Can I collect Social Security if I move abroad after retiring?
A4: Yes, but it depends on the country. The SSA has treaties with many nations to allow this.
Q5: What’s the biggest hidden cost retirees forget to consider?
A5: Long-term care. Many overlook the cost of assisted living or nursing homes, which can vary drastically by state.
