For decades, Florida has been celebrated as the ultimate retirement destination in the United States, with its idyllic beaches and warm climate drawing countless seniors. However, a significant shift is underway as escalating real estate prices and a soaring cost of living are rendering the Sunshine State increasingly unaffordable for many retirees, particularly those with annual incomes below $75,000, according to a recent analysis by The Wall Street Journal.
The Search for Affordable Alternatives
This financial pressure has prompted a growing number of retirees to reconsider their plans and explore more budget-friendly locations. Following the lead of long-term Florida residents who have already relocated, three states have emerged as particularly attractive alternatives. These states offer a compelling combination of a lower cost of living, competitive tax policies beneficial to older demographics, and reasonable Medicare performance, making them top destinations for former Floridians, as highlighted in a 2024 report from the Florida Chamber of Commerce.
To identify these leading alternatives, The Independent conducted a thorough analysis using data from several reputable sources. This included cost-of-living statistics from the Council for Community & Economic Research via the Missouri Economic Research and Information Center, Medicare performance scores from the non-partisan Commonwealth Fund, and tax policy information from the nonpartisan Tax Foundation.
Texas: The Warm-Climate Contender
Texas stands out as a prime alternative for retirees seeking a warm climate, access to beaches, and a favourable tax structure. The state boasts a cost of living ranked 11th nationally, outperforming Florida specifically in grocery, housing, and transportation expenses. Crucially, Texas joins Florida as one of only nine states with no individual income tax, providing a substantial advantage for retirees. This means withdrawals from retirement accounts like 401(k)s and traditional IRAs are not subject to state income tax, unlike in 41 other states.
For illustration, consider that the average 401(k) balance for individuals in their 60s is approximately $580,000. In a state with an income tax, such as Georgia with its 5.39% rate, a retiree could face a tax bill of around $31,000 on that sum before deductions. Texas avoids this entirely. However, it is important to note that the state's Medicare system is ranked among the worst in the country. For those concerned about missing Florida's coastline, Texas offers consolation with the nation's eighth-longest shoreline, providing ample opportunity for sun and sand.
North Carolina: The Well-Rounded Performer
North Carolina distinguishes itself as the only state among the trio to rank within the top 30 across all three key metrics analysed. It holds the 26th position for cost of living (still more affordable than Florida), 14th for Medicare performance (the best ranking of the three states), and 22nd for its individual income tax situation. The state's income tax rate is a relatively low 4.25%, and it maintains competitive property and sales tax systems.
This balanced appeal has made North Carolina the top destination for people migrating from Florida between 2019 and 2024. Furthermore, the state promotes an active lifestyle for seniors, ranking among the top 20 for physical activity, with older residents averaging 98.1 active minutes daily. It also features the country's seventh-longest shoreline.
Tennessee: The Tax-Friendly Hub
Tennessee earns high marks primarily for its exceptional tax environment, receiving a top ranking from the Tax Foundation due to its complete lack of a state income tax. Similar to Texas, retirees benefit from no state taxes on withdrawals from 401(k)s and traditional IRAs. Complementing this, Tennessee boasts an impressive 8th place ranking for cost of living, with excellent scores for grocery prices, utilities, and transportation costs.
While its Medicare performance is ranked 39th, this is still an improvement over Florida's ranking. Tennessee also supports an active senior community, with older adults averaging 97.6 minutes of daily activity, placing it among the top 20 states. This combination of financial benefits and lifestyle factors makes Tennessee a powerful magnet for cost-conscious retirees leaving Florida.
