When assessing the best and worst states for retirement in the U.S., an interesting contrast arises: the top-rated state is one of the nation’s smallest, while the worst is the largest. For the third consecutive year, Alaska holds the title of the worst state for retirees, according to Bankrate’s study on the best states to retire in 2024.
Criteria for Ranking States
Bankrate’s comprehensive evaluation of all 50 states is based on five crucial categories, each weighted according to its importance for retirees:
Affordability (40%): This category weighs the financial aspects that impact retirees, such as local and state taxes, the overall cost of living, and average annual property taxes. Affordability is vital since many retirees live on fixed incomes, making this factor critical when selecting a retirement destination.
Overall Well-Being (25%): This aspect assesses the quality of life for retirees by looking at the population of adults over 62 per 100,000 residents, access to nutritious food, and the availability of healthcare services. This score reflects how livable a state is for older adults.
Health Care Quality and Cost (20%): With healthcare needs increasing with age, this category evaluates the financial burden of healthcare and the performance of each state’s healthcare system. States with accessible and high-quality healthcare score higher in this area.
Weather (10%): This criterion considers climate factors such as average annual temperatures and the frequency of natural disasters like tornadoes, earthquakes, and hurricanes. A mild and stable climate is generally more desirable for retirees.
Crime (5%): Safety is a major concern, especially for retirees who may be more vulnerable to crime. This category measures the prevalence of property and violent crime per 100,000 people.
Bankrate utilized data from reputable sources, including the Council for Community and Economic Research, the U.S. Census Bureau, the Tax Foundation, and the National Oceanic and Atmospheric Administration, to compile these rankings.
The Lowest Ranking States
Alaska ranks as the least favorable state for retirees primarily due to its extreme weather conditions, which are rated the worst among all states. Despite mild summer temperatures ranging from 45 to 75 degrees Fahrenheit, winter temperatures can plunge as low as -10 degrees Fahrenheit, presenting a significant challenge for retirees.
The high cost of living in Alaska further diminishes its appeal to retirees, particularly those on fixed incomes. The overall cost of living in Alaska is approximately 30% higher than the national average, according to RentCafe. Housing costs in the state are about 17% higher, and utilities and healthcare expenses are nearly 50% higher than the national average. These financial burdens make Alaska a less affordable and less attractive retirement option.
However, Alaska does offer some financial advantages, particularly in its tax policies. The state imposes no income, inheritance, or estate taxes. Additionally, Alaska does not tax pension payments or Social Security benefits, making it relatively tax-friendly for retirees.
Affordability issues are not unique to Alaska and are a common thread among other states that rank low on the list. For instance, New York, Washington, and California are also known for their high cost of living, which can deter retirees.
It’s important to note that a higher cost of living does not automatically rule out a state as a potential retirement destination. Prospective retirees should consider setting aside more money if they plan to retire in a state with a higher cost of living. Tools like CNBC Make It’s retirement calculator can help estimate the savings needed based on factors such as age, current savings, income, and desired retirement age.
While financial considerations are crucial, they should not be the only factors in choosing a retirement destination. Non-financial considerations, such as access to social activities and a strong sense of community, are equally important. Kerry Hannon, a retirement expert and author of In Control at 50+: How to Succeed in the New World of Work, emphasizes the significance of these factors. “Having that sense of community and human connection is huge for healthy aging,” Hannon states in the Bankrate study. She advises against moving toward isolation and loneliness, stressing the importance of finding a community that supports a fulfilling and connected life in retirement.
FAQs:
Why is Alaska ranked as the worst state for retirees?
Alaska ranks lowest primarily due to its harsh weather, high cost of living, and limited access to healthcare, despite having favorable tax policies for retirees.
How important is affordability in choosing a retirement state?
Affordability is crucial since many retirees live on fixed incomes. High living costs can significantly impact the quality of life in retirement.
Can a state with a high cost of living still be a good retirement destination?
Yes, but it requires careful financial planning and possibly setting aside more savings to ensure a comfortable retirement in a higher-cost state.