This ranking blends three things that actually determine retiree costs: cost of living (MERIC 2025 index), housing prices, and how the state taxes retirement income.
The ranking
1. Oklahoma City, OK
Oklahoma is the cheapest state in the country (MERIC index 86.0, 14% below average; BEA price parity 87.8). No state tax on Social Security. Median home values sit around $222,000. Your dollar simply goes 15–20% further here than the national average.
2. Jackson, MS
Mississippi runs 13% below the national average on living costs, and the state exempts both Social Security and pension income. Housing is among the nation's cheapest. The tradeoff: healthcare access lags in rural areas — check hospital proximity.
3. Birmingham, AL
Alabama: no tax on Social Security or pensions, average home prices around $210,000 [verify], and a real metro with real hospitals and an airport. One of the best value propositions in the country.
4. Little Rock, AR
Arkansas has the lowest BEA price parity in America (86.9) and exempts Social Security from state tax. A comfortable retirement here costs roughly 13% less than the national average across the board.
5. Topeka / Wichita, KS
Kansas sits about 11% below average on costs. Property taxes are the catch — Kansas runs above average there — so this pick favors renters or modest homes.
6. Knoxville, TN
Tennessee has no state income tax at all, doesn't tax Social Security, and costs about 10% below the national average. Watch the sales tax (among the nation's highest), but for retirees who've stopped buying lots of stuff, that's a fine trade.
7. San Antonio, TX
No income tax, no Social Security tax, and living costs about 13% below the national average with average home prices around $250,000 [verify]. Big-city amenities — the River Walk, military healthcare infrastructure — at small-city prices.
8. Des Moines, IA
Iowa now exempts all retirement income — Social Security, pensions, 401(k)s, IRAs — for residents 55 and older, and eliminated its inheritance tax. Costs run about 10% below average. Cold winters are the price of admission.
9. El Paso, TX
Texas tax benefits plus border-city prices: housing costs run more than 20% below the national average. One of the safest large cities in America, with costs to match a much smaller town.
10. Tucson, AZ
Arizona doesn't tax Social Security, and Tucson's metro median home price is around $388,500 — far below Phoenix. Desert living with mountain views at a 30–40% discount to coastal Arizona alternatives like Scottsdale.
11. Las Cruces, NM
New Mexico partially taxes Social Security (one of only 8 states that do), but costs run ~6% below average and housing is cheap. Best for retirees whose income stays under the state's exemption thresholds.
12. Fort Wayne, IN
Indiana costs about 9% below the national average with genuinely cheap housing (median values well under $250,000). Doesn't tax Social Security. The Midwest's quiet bargain.
What the cheap states have in common
- No tax on Social Security — 42 states plus D.C. now exempt it; all 12 picks above do
- Housing drives everything — the gap between the cheapest and priciest states is mostly housing; Oklahoma's housing costs run ~31% below average
- The South and Midwest dominate — 9 of the 12 are in these regions
The honest caveats
Cheap isn't everything. West Virginia is the 4th-cheapest state and ranks dead last for healthcare access. Before moving, check: hospital quality within 30 minutes, state taxation of your specific income mix (pensions vs. 401(k) vs. Social Security differ), property tax rates, and whether you'll actually enjoy the winters.
FAQ
Q: What is the absolute cheapest state to retire in?
A: By cost-of-living data, Oklahoma — about 14% below the national average — with Mississippi and Alabama close behind. But "cheapest" should include taxes: a cheap state that taxes your pension can cost more than a pricier state that doesn't.
Q: Which states don't tax Social Security in 2026?
A: 42 states plus D.C. Only Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont still tax some benefits — and most have income thresholds that shield lower-income retirees.
Q: Is Florida actually cheap for retirees?
A: Not anymore. Florida's cost index sits slightly above the national average, and homeowner's insurance averages ~$8,300/year — the highest in the country. The no-income-tax benefit is real, but housing and insurance have eaten it.
Q: Should I move just to save on taxes?
A: Run the full math first: moving costs, new home prices, healthcare access, and proximity to family. A 5% tax saving rarely justifies a move you don't otherwise want to make.
Q: How much does the average retiree spend per year?
A: BLS data puts average annual expenditures for all consumer units at $78,535 (2024). Retiree households typically spend less — but housing still takes the biggest bite, especially after 75.
Tool tie-in: Retirement relocation calculator — compare your current state's costs and taxes against any destination state.