10 States Where Retirees Are Quietly Losing Thousands of Dollars a Year (Without Realizing It)

Retirement isn't just about how much you have saved. It's also about your expenses, and where you live plays a huge role in how much you spend. 

Many retirees choose a state because it's familiar, close to family, or offers a lifestyle they want. The trouble starts when the financial side of choosing a state doesn't get the attention it deserves.

A move that might look affordable at first glance may turn out to be more expensive once the bills start arriving. Before you make the surprising retirement mistake of moving to an expensive state, here are some of the states where retirees often spend more than they expected.

New Jersey

New Jersey homeowners pay some of the highest property taxes in the country. According to the Tax Foundation, this state ranks highest nationwide in property taxes at 1.88%.

On a home worth $500,000, that works out to roughly $9,400 in property taxes each year. For retirees who expected housing costs to drop after paying off their mortgage, these annual bills can come as an unpleasant surprise.

Connecticut

Connecticut has a reputation as being one of the more expensive states, and retirees can feel this especially. Property taxes, housing costs, and utilities are all costly and well above the national average.

When you're on a fixed budget, these expenses can add up fast. Even those who plan carefully may find themselves spending thousands more per year in Connecticut than they would in another state.

Vermont

Vermont offers beautiful scenery and a slower pace of life, which explains why many retirees are drawn to it. However, living here isn't necessarily cheap.

Property taxes are higher than average. Vermont ranks #4 in property taxes nationwide. Winter heating bills can also be substantial, and retirement income is taxable at the state level in many cases. All of these can cut into the average retiree's budget.

Illinois

Illinois can look like a retirement-friendly state because it doesn't tax Social Security benefits or pensions. However, it's important not to stop your research there.

Property taxes in Illinois are some of the highest in the country. In fact, they rank #2 according to the Tax Foundation. A homeowner with a property valued at around $350,000 could easily face an annual bill exceeding $6,500. Over a long retirement, that difference can easily add up to over $100,000.

California

California's weather and lifestyle are often a draw for retirees, but the financial tradeoff can be significant. For instance, housing costs are some of the highest in the country, and retirees who rely heavily on a traditional IRA or 401(k) generally owe the state taxes on that money.

Those expenses alone can add up to thousands over retirement, and that isn't counting the higher insurance, utility, and health care costs in many areas of the state. However, California does have lower property taxes.

New York

For those living in New York, it can be hard to leave behind friends and family. However, staying comes with potentially high costs. Property taxes are steep in many parts of the state, though New York ranks #11 in the country as a whole.

Housing expenses are also higher than the national average, and the cost of living can be significantly higher compared to other states.

Rhode Island

Rhode Island isn't one of those states that tends to make headlines, but it is getting more expensive for retirees.

Housing costs have climbed steadily over the last few years, and property taxes remain high in many areas. Retirees with investment income or retirement-account withdrawals may also face state income taxes that reduce their spendable income.

Massachusetts

Massachusetts consistently ranks as one of the most expensive states in the nation, especially for retirees. Housing costs are substantially higher than in other states, and high everyday costs can eat into retirement budgets, too.

Retirement account withdrawals are also taxable by the state in many cases. That means for retirees on a fixed income, things can start being noticeably tight quickly.

Colorado

Colorado is starting to become an increasingly popular destination for retirement, but that popularity does have a price. Home values have risen dramatically over the past decade, though they've started to level out, and the cost for just about everything else has followed. The cost of living in Colorado is higher than the national average.

Luckily, the state does offer some retirement income deductions, which can help retirees keep more money in their pockets.

Hawaii

Hawaii's island lifestyle makes it a retirement dream for many Americans. However, the numbers can be difficult to ignore.

Housing costs rank among the highest in the country. Groceries, utilities, transportation, and health care are also exceedingly expensive, ranking among the highest in the country. Depending on where someone is moving from, the difference can easily reach several thousand dollars per year.

Bottom Line

Retirement costs are about more than state income taxes. Property taxes, housing expenses, cost-of-living, health care, and insurance premiums all impact how much a state costs to retire in. In many states, those expenses can add up to thousands of dollars more per year, even for retirees who own their homes.

One practical step is to compare your total annual expenses across several states before deciding to move or stay put. A difference of just $5,000 per year adds up to $100,000 over a 20-year retirement. For households whose retirement savings are stretched thin, identifying those hidden costs may be one of the most effective ways to free up your retirement budget without reducing your quality of life.