The best and worst states for retirement in 2021: Study

Jeff Ostrowski, Bankrate Analyst, joins Yahoo Finance Live to break down Bankrate’s ranking of the best states for retirement in 2021 and how to pick your best state to retire.

Video Transcript

KRISTIN MYERS: Well, if you are looking to retire, the Sunshine State should no longer be on top of your list. That's according to a new study from Bankrate. Georgia has beat out Florida as the best place to retire in the country for its affordability, culture, weather, and more.

We're joined now by Jeff Ostrowski, an analyst with Bankrate. So Jeff, typically we see Florida as the top spot for places to retire. Why did it slip in its rankings? What made Georgia the most desirable place to retire in the country?

JEFF OSTROWSKI: Well, I will say it was a pretty close race. So Florida and Georgia were neck and neck in our rankings. But in some ways, Florida has been a victim of its own success over the decades. So we really weighted affordability heavily in this index. And Florida is no longer super-affordable, but Georgia is more affordable in comparison to Florida.

So the median home price in the Atlanta metro area is about $279,000 now. And that's less than any of the metro areas in Florida. And it's less than the national average. So Georgia is really presenting a good value for homebuyers. But the cost of living and the tax burden are fairly low in Georgia. And so that really propelled it to the top of our rankings this year.

ALEXIS CHRISTOFOUROS: Yeah. You mention the keyword there, taxes, right, Jeff? I mean, when you think about retirement, you want to go to places where you have the lowest possible tax rate, which is the reason why Florida has been so popular for so many years. So I was surprised to see Massachusetts be the fifth best place to retire, according to your study. I don't think of Massachusetts as a low tax state. Tell us why it made the list and why so high up.

JEFF OSTROWSKI: You're correct. So yes, Massachusetts is an unaffordable state. It's a comparatively high tax state. Massachusetts was really propelled into the top five based on our wellness ranking. And so that looks at things like public health, access to health care, food availability, economic security.

And it's intriguing. As I was running these numbers, there was no one state that did well across the board in these categories. And there was no one state that really did poorly. And so the states with higher taxes and higher cost of living also tended to have better wellness rankings. So it's sort of a give-and-take.

And even though we rank these states from one to 50, there really was no state that stood out as clearly the best choice or clearly the worst choice.

KRISTIN MYERS: That said, there is still a bottom to this list. So take us through some of those worst states, so to speak, to retire. And what made them essentially clinch those last spots?

JEFF OSTROWSKI: Well, Maryland repeated as the last place, the state in our ranking. It was brought down by a high cost of living, a low affordability reading. And then its other rankings just weren't really good enough to move it up in the pack.

And speaking of taxes, I talked to a financial planner in Maryland who was lamenting that Maryland is one of the few states that imposes its own state estate tax. So that might be a disincentive to some wealthier retirees from staying in Maryland. And in some ways, Maryland, like Florida, is sort of a victim of its own economic success. I mean, much of Maryland is in the DC area, which has been booming. Home prices have been soaring there over the decades.

So it's not necessarily a bad place to live in your working years. But it didn't do well on our retirement index.

ALEXIS CHRISTOFOUROS: I'm glad you said it because there really is no one state that sort of checks all the boxes, I think, when it comes to the ideal retirement place. There's always sort of a give-and-take, right, something that you're giving up for something you're going to be getting. But I'm wondering, when people are thinking about where to retire, what are some tips you can offer them? I mean, I would think you'd want to try out the place you're thinking about retiring in before you actually wind up moving there.

JEFF OSTROWSKI: Right. And one caveat here is that this is a very subjective and personal decision. And so we're dumping this data into an index and trying to put some objectivity onto this decision. But it's still going to be a deeply personal decision.

Where you retire is going to depend a lot on where your family lives, where your friends are, and what you like. I mean, in this index, we downgraded states with cooler temperatures and upgraded states with warmer climates. But if you hate hot weather and you like snow, then this index probably isn't going to apply to you and your personal situation.

But yes, one piece of advice that I heard from a number of retirement experts I talked to is go try out a state. Don't just move somewhere on a whim. But go live there. Maybe rent a place for six months or a year. And get to know the area. And see if you really like it before you commit to buying a retirement home.

KRISTIN MYERS: Looking at some of the categories that you guys were scoring essentially to rank sum of these states, I do think of some of them as tied to, sometimes, the politics of the state. Now, I haven't done a full breakdown of this list. But I'm curious to know if there is a difference between Republican and Democratic states in terms of what's the best place to retire. Or is it just a mixed bag right now out there?

JEFF OSTROWSKI: I think it's a mixed bag. I mean, certainly, some people who are really strongly partisan are moving to places where they can be with more like-minded people. I don't think most retirees are looking to see whether it's a red or blue state that they're moving to.

But of course, the blue tax states tend to have-- or I'm sorry, the blue states tend to have higher tax burdens and higher costs of living. But yeah, it's a bit all over the board. I mean, Massachusetts, of course, is a blue state, and it made our top five. So the readings are kind of all over the place. But I don't think there's any clear political trend here.

KRISTIN MYERS: All right, Jeff Ostrowski, Bankrate analyst, thanks so much for breaking all of that down for us.