Retirement Retired Life

10 High-Tax States That Can Wreck Your Retirement Savings

Sunshine states aren't always so sunny for your wallet.

By Stacy Garrels

Edited by Kristy DeSmit

Updated March 8, 2026

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Retirement should be about enjoying life to the fullest. Where you live plays a major factor, as it's hard to enjoy life when you're shoveling money into an endless tax pit each month.

Cost of living is far from equal everywhere, and in retirement, the gap between low- and high-cost states is even starker. A small fortune in one state may leave you house-poor in another.

Below, we outline 10 states where the high cost of living can make it challenging to avoid wasting money in retirement.

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Hawaii

Hawaii tops the list for the highest savings needed to retire. According to Kiplinger, retirees there need about $2,198,902 in savings, based on annual expenditures of $110,393.

While property taxes are relatively low, nearly everything else in the island state — housing, groceries, utilities — carries a premium due to shipping and geographic isolation. That elevated cost of living can strain even well-funded retirement accounts.

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Massachusetts

Massachusetts comes in second on Kiplinger's list. Retirees there need roughly $1,755,055 in retirement savings to cover annual costs of $92,639.

The state taxes some forms of retirement income and has some of the highest housing prices in the Northeast. The current median list price for a home in Massachusetts sits at $699,000.

These costs, along with high property taxes and everyday expenses, combine to make it one of the costliest states for retirees to remain financially comfortable.

California

California places third for the most expensive states to retire.

California's sunshine comes with a steep tax bill. Retirees there need about $1,538,508 in savings, with annual living costs averaging $83,998.

The state taxes 401(k) and IRA withdrawals at regular income rates, which can reach up to 13.3%.

With the added burden of high housing and utility costs, California can quickly sink a retirement budget.

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New York

New York retirees face annual expenditures of roughly $77,773, translating to a total savings target of about $1,383,392.

In addition to high state income taxes, which reach 10.9% for top earners, New York has an estate tax "cliff."

That "cliff" means that if a New York estate is just a little over the state's estate tax limit — more than 5% above it — the estate can lose the exemption entirely. Instead of being taxed only on the amount over the limit, the entire estate becomes taxable.

New Jersey

Seniors in New Jersey need an estimated $1,199,096 in total retirement savings to cover $70,401 in annual living costs.

While this makes New Jersey more affordable than many other coastal states, its high income and property taxes can be brutal.

According to the Tax Foundation, New Jerseyans have the highest owner-occupied property taxes in the nation. For 2025, the average annual property tax bill came in at about $10,570.

Connecticut

Retirement in Connecticut comes at a price tag of approximately $1,191,417 to sustain annual expenditures of $70,094.

Additionally, the state taxes Social Security benefits for many, and residents pay high utility costs and property taxes.

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Vermont

In Vermont, you need around $1,185,274 to comfortably retire, with annual living costs near $69,848.

Property taxes are elevated, and the state taxes most forms of retirement income. For retirees who rely on investment withdrawals, that combination can significantly increase annual tax liability.

Rhode Island

Rhode Islanders need about $1,180,666 in retirement savings to support annual expenses of $69,664.

The state taxes some retirement income and it maintains relatively high property taxes. In a small state with limited low-cost housing options, affordability may be a challenge.

Illinois

Illinois is known for its ultra-high property taxes. The Tax Foundation ranks the state's effective rate of 1.83% as the highest in the U.S.

Although Illinois does not tax most retirement income, retirees still need about $911,901 in savings to cover average annual expenditures of $58,913.

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Washington

Washington retirees face annual expenditures of about $69,971, requiring roughly $1,188,345 in savings.

While the state does not impose a traditional income tax, its high sales taxes and skyrocketing property costs in major metro areas are burdens that far offset any income tax gains.

Bottom line

Statewide taxes can reshape retirement plans. In Hawaii, retirees may need almost $2.2 million in savings, compared to about $735,284 in Oklahoma — a difference of roughly $1.5 million.

Before committing to a retirement destination, review income taxes, property taxes, estate rules, and cost-of-living data carefully.

A move to a truly lower-tax state could preserve hundreds of thousands of dollars over decades of retirement. However, lower-tax living may mean fewer public resources, limited access to medical care, and hefty travel bills to visit family and friends.

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