Most people spend years thinking about where to invest towards meeting their financial retirement goals but almost no time thinking about where to live towards the same goals. Yet, your home state may be the single biggest influence on how much wealth you keep after taxes in your retirement years.

Where You Live Is What You Keep

State tax laws are wildly inconsistent. A few states tax almost every dollar you earn or withdraw in retirement. Some let you keep your Social Security and pension income in full. Others treat it as ordinary income and take a piece every year. The result is a patchwork of financial environments that can make two identical households, earning or withdrawing the same amount, live entirely different financial lives depending on which side of a border they call home.

Now, you cannot look at this issue as one-dimensional. Choosing where you want to live is not just about chasing the lowest tax rate at all costs. Where you live is a mix of head and heart. Family, climate, community, and access to healthcare matter as much as any spreadsheet. But the tax side still deserves consideration. If you ignore it, you could lose thousands of dollars each year without realizing it. For anyone nearing retirement, working remotely, or simply flexible enough to relocate, your address can become part of your financial plan.

The Real Cost of Your ZIP Code

For high-income earners, moving to a no-income-tax state will be an instant pay raise. States such as Texas, Florida, Tennessee, and Nevada do not collect tax on wages or investment income. The difference for top earners is profound. Moving from California (a high-income-tax state) to Texas (a no-income-tax state) will lead a high earner to gain an additional 27% in after-tax income. That extra cash can fund savings, investments, or travel if it isn’t absorbed by higher costs elsewhere in the no-income-tax state.

In many of the states where you pay no income tax, what you save on income tax may show up in steeper property assessments, elevated sales taxes, or pricier home insurance. So check and compare.

For those entering retirement, the focus shifts from earning a living to drawing down savings for income. Several states, like Florida, Alaska, South Dakota, Washington, and Wyoming, leave retirement income completely untouched. Social Security, pension checks, and withdrawals from 401(k)s or IRAs flow in tax-free. That gives portfolios more staying power, especially for people who depend on fixed distributions. Retirees in high-tax states often face the opposite reality, watching a slice of those same withdrawals disappear every year.

The differences grow even starker for people with traditional pensions. Illinois, Mississippi, and Pennsylvania don’t tax pension income at all, which makes them appealing to teachers, first responders, and other public-sector retirees. Veterans see similar advantages in Alabama, Hawaii, and Michigan, where military pensions are exempt. For households living largely on pension income, those policies can tilt the math enough to justify a move.

Then comes the property-tax wildcard. Some states replace lost income-tax revenue by taxing homes heavily. New Jersey, Illinois, and Connecticut rank near the top of the list for high property taxes, while Hawaii and Alabama remain among the most affordable states. A retiree trading a paycheck for a pension might find that the local property bill or rising home-insurance premiums eat away at the savings from lower income taxes.

Location, Location, Location

Your taxes don’t fluctuate like the stock market, as they’re written into law. That rigidity makes them one of the few financial variables you can plan around with confidence. Choosing where you live can create predictable, compounding advantages.

Take the math for a test drive and see that a move across state lines can outperform your last five trades. A household earning $200,000 in a high-tax state could save $15,000 a year simply by moving to a no-tax state. Stretch that over a decade and you’ve banked well over six figures, without any investment risk.

For retirees, it’s just as real. Forgoing the payment of state taxes on an $80,000 annual withdrawal can mean an extra $6,000 a year to use for other expenses, such as healthcare, travel, or family. Those savings, if repeated yearly, can add up to a long-lasting financial benefit for retirees. Lower recurring costs mean more control over lifestyle choices, charitable giving, or the timing of withdrawals from investment accounts.

Even small shifts inside the same state can matter. Moving from a county with higher property assessments to one with lower rates can trim annual costs by thousands. Downsizing or renting may make sense in states where real-estate taxes eat into fixed retirement income.

Pick Your State Like You’d Pick an Investment

Where you live shapes your wealth more than many investments do. State taxes, property costs, and retirement rules determine what you actually keep. Choosing your ZIP code wisely can turn location into one of the most reliable wealth multipliers in your portfolio. You can also benefit from the taxation differences indirectly by investing in the ETF below. Click each ticker to see why we chose it:

iShares U.S. Real Estate ETF (IYR)

Vanguard Tax-Exempt Bond ETF (VTEB)

SPDR S&P Dividend ETF (SDY)

iShares High Yield Muni Active ETF (HIMU)

Bottom Line

Tax codes are predictable wealth tools. Choosing where you live with the same discipline you use to pick investments can lock in high annual savings. In personal finance, geography is leverage. What you keep depends on where you stay.

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November 30, 2025