You may step away from your job, but your obligation to pay taxes continues into retirement. The amount you’ll owe once you retire largely depends on the state you live in. Here are 13 states that currently do not tax retirement income.

1. Alaska

In Alaska, there are no state taxes; the absence of an income tax means you won’t incur state tax on your Social Security benefits, pension income, or 401(k) and IRA withdrawals.

However, if you have the urge to relocate to this Last Frontier, be aware that local sales taxes can rise to nearly 8% in certain regions, so choose your location wisely.

2. Florida

Florida is celebrated for its favorable tax situation, lacking state taxes on:

  • 401(k), 403(b), or IRA withdrawals.
  • Pension payments.
  • Estate or inheritance tax.
  • Basic necessities like groceries.

Keep in mind, though, that rising insurance costs and limited public transit options might affect your experience if relocating here.

3. Illinois

Illinois offers a flat income tax rate of 4.95%, which is relatively low. Importantly, retirement income is exempt from taxation, so you won’t pay state taxes on Social Security, 401(k), IRA distributions, or pensions.

While retirees benefit from these exemptions, be aware that the state does impose taxes on investment income, estates exceeding $4 million, and it has one of the highest sales tax rates in the nation.

4. Iowa

In Iowa, Social Security benefits are not taxed at any age, and those aged 55 and older enjoy further exemptions on retirement income, including 401(k), 403(b), and 457(b) distributions, as well as SEP and SIMPLE plans.

5. Mississippi

Known for being tax-friendly, Mississippi exempts Social Security benefits, pensions, and 401(k) and IRA distributions from state tax.

While a flat state income tax of 4.4% applies to income over $10,000, there are no estate or inheritance taxes here, and the income tax rate is set to decrease to 4% next year.

6. Nevada

In Nevada, wages, retirement, and investment income are all free from state taxation. While property taxes are manageable, the state’s sales tax is 6.85%, which is above average compared to other states.

7. New Hampshire

Similar to Alaska, New Hampshire does not impose a general income tax. Thus, there are no taxes on Social Security, pensions, or IRA/401(k) distributions. Additionally, the state recently repealed its dividend and interest taxes and is one of the few states with no sales tax.

8. Pennsylvania

With a flat income tax rate of 3.07%, Pennsylvania makes retirement planning easier by not taxing IRA and 401(k) distributions, Social Security, or pensions. However, prospective movers should consider the state’s significant inheritance tax.

9. South Dakota

Beyond its famous attractions like Badlands National Park and Mount Rushmore, South Dakota levies no personal income tax, safeguarding your retirement income completely. There are also no taxes on dividend or interest income, nor does the state impose inheritance or estate taxes.

10. Tennessee

Much like others in this list, Tennessee has no personal income tax, allowing residents to keep their Social Security benefits, pensions, and 401(k)/IRA distributions tax-free.

  • Pro: There’s no inheritance or estate tax.
  • Con: Tennessee has the second-highest sales tax in the U.S.

11. Texas

Texas rounds out the list of retiree-friendly states with no personal income tax, making all income from employment, retirement sources, and inheritance free from state taxation. However, sales tax can be relatively high depending on the area.

12. Washington

Residents of Washington not only enjoy stunning natural beauty but also benefit from no personal income tax. While sales of assets like stocks and bonds (with gains exceeding $250,000 annually) are taxed, Social Security, pension income, and 401(k) and IRA distributions are exempt.

The downside is the combined sales tax in Washington, which ranks as one of the highest in the country.

13. Wyoming

Living in Wyoming means you’ll owe no state income tax on wages, investment income, or any retirement and pension income, including Social Security and military retirement benefits.

Wyoming also keeps its state and local sales taxes low, and there are no taxes owed on interest, dividend income, or inheritances.

Regardless of your state, it’s essential to stay updated on tax laws, as they can change frequently.