13 States Where You Can Retire Tax-Free on Your 401(k) and Other Retirement Income

Retirement is a significant milestone that marks the end of your working years and the beginning of a new chapter in life. It’s a time to relax, pursue your passions, and enjoy the fruits of your labor. However, taxes can put a damper on your retirement savings, especially if you live in a state with high income taxes.

If you’re looking to minimize your tax burden in retirement, consider relocating to one of the 13 states that don’t tax retirement income. These states offer significant tax savings that can help you stretch your retirement dollars further.

States with No Income Tax

The following eight states have no income tax whatsoever, meaning you won’t pay taxes on any type of income, including retirement income:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

States that Don’t Tax Retirement Income

In addition to the eight states with no income tax, there are four other states that specifically exempt retirement income from taxation:

  • Illinois
  • Iowa
  • Mississippi
  • Pennsylvania

States that Don’t Tax Social Security

Thirty-nine states plus the District of Columbia do not tax Social Security income for retirees. The 11 states that do tax Social Security benefits include:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont

Other Retirement Income Tax Issues

While the states listed above don’t tax retirement income at all, there are other states that provide some exemptions. Several states don’t tax military retirement pay, while other states treat pension income differently than distributions from retirement plans such as 401(k)s or IRAs.

Be sure to understand the tax implications of living in a state before deciding where to retire. Taxes on retirement income are one element of the equation, but you’ll also want to consider things like sales and property taxes to get a complete picture. You may ultimately decide that paying more in taxes is worth it to you if a state offers other benefits that make up for the higher cost.

If you’re looking to avoid paying state taxes on your retirement income, you have 13 states to choose from. These states offer significant tax savings that can help you stretch your retirement dollars further. However, it’s important to consider other factors, such as the cost of living and the availability of healthcare, before making a decision.

Additional Tips for Minimizing Retirement Taxes

  • Contribute to a Roth IRA or Roth 401(k). Withdrawals from Roth accounts are tax-free in retirement.
  • Consider a traditional IRA or 401(k) if you’re in a high tax bracket now and expect to be in a lower tax bracket in retirement. You’ll get a tax break now, and you’ll only pay taxes on your withdrawals in retirement.
  • Delay taking Social Security benefits until you reach full retirement age. You’ll receive a higher monthly benefit if you wait.
  • Consider moving to a state with no or low income taxes. This can save you a significant amount of money in taxes over time.

By following these tips, you can minimize your retirement taxes and maximize your retirement savings.

Which States Do Not Tax Retirement Income


What state is best financially to retire in?

Best States To Retire in 2024 FAQs. Q: What is the best state to retire in 2024 for retirees? A: The best state to retire in 2024 is sunny Florida, according to WalletHub, thanks to its relative affordability and high quality of life for seniors. That’s followed by Colorado, Virginia, and Delaware.

Does Hawaii tax 401k?

The good news is that public and private pension income is tax-exempt in Hawaii. The bad news is that all other forms of retirement income are taxed and are not eligible for any kind of deduction. So if you plan on living off of income from a 401(k), an IRA, you should plan to pay taxes on that income.

How many states do not tax Social Security?

At the state level, policies vary: 38 states and the District of Columbia do not tax Social Security benefits, while 11 states do. One state, Colorado, only taxes Social Security benefits received by residents under age 65. Rates vary by state, as do the exclusions and income limits.

Which states do not tax 401(k) distributions?

States that do not tax 401 (k) distributions are generally the same states that don’t tax income. Those states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire and Washington don’t tax 401 (k) distributions either. Which states do not tax pensions?

Which states do not tax retirement income?

In addition to the nine states above that don’t have an income tax at all, four states do not tax retirement income: Illinois, Iowa, Mississippi and Pennsylvania. Here’s what you should know about each one. Illinois charges a flat state income tax of 4.95 percent, but all retirement income is exempt from paying the tax.

Which states have no income tax?

Let’s start with the eight states that have no income tax whatsoever: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. A ninth state, New Hampshire, also has no income tax, so it doesn’t tax retirement distributions. It does, however, tax interest and dividends, which many retirees depend on for retirement income.

Which states do not tax pensions?

States that do not tax pensions include the seven states that have no income tax — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming — as well as New Hampshire and Washington. Additionally, five states — Alabama, Hawaii, Illinois, Mississippi, and Pennsylvania — exclude pension income from state taxation.

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