With inflation devaluing the dollar’s value and recession hitting many older working people, moving to no-retirement income tax states that allow you to maximize every hard-earned dollar may be a sound financial move.

Ultimately, where seniors spend their golden years can impact the benefits they’ll receive from their retirement savings, as some states levy taxes on Social Security benefits, IRAs, and retirement income sources while others don’t.

Let’s find out common income sources for American retirees, which ones are taxable, and which states do not tax retirement income.

What are the common sources of retirement income? 

1. Social Security;

2. Retirement accounts, including Roth contributions, traditional IRA, and 401(k) accounts, withdrawable at age 59½; 

3. Annuities and CDs, such as insurance contracts and time-deposit accounts issued by banks and credit unions;

4. Pensions, such as defined benefit pension that is fully employer-sponsored and defined contributions, such as 401(k)s, 403(b)s, and employee and stock ownership plans;

5. Bonds, such as Treasury, corporate, and municipal bonds that have a maturity;

6. Home or real estate property. 

For most retirees, Social Security and 401(k) plans are their top two income streams. 

Which states do not tax retirement income? 

A total of 15 states don’t tax retirement income—with 11 states without an income tax and four states that don’t tax your retirement income.

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming
  • New Hampshire

If you live in these states, you won’t have to pay taxes for wages and salaries, stock gains, and profits from all investments. Following similar tax exemptions, these are also states with no tax on retirement income, including Social Security benefits, 401(k), IRA distributions, and withdrawals on retirement savings.  

But in New Hampshire, residents earning from dividend-paying stocks, mutual funds, and other investment income are state-required to pay a 5% tax. The good news is the taxable period is only until December 31, 2026. After that, it becomes tax-free.

What states don’t tax your pension?

Four states don’t tax 401(k) plans, IRA, and pension accounts:

  • Illinois
  • Mississippi 
  • Pennsylvania 
  • Iowa (starting January 1, 2023)

Although these are states with no tax on retirement income, please note that withdrawals from accounts before reaching the required age will incur taxes. Wages, salaries, and other residual income outside retirement accounts are taxed.

What states have no tax on Social Security?

Out of 50, 38 states don’t tax Social Security benefits.  

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • Nevada
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

These states may treat Roth accounts and other retirement income differently and issue tax policies that either exempt or minimize state-level taxes. For instance, Arkansas and Virginia partially tax withdrawals from retirement accounts, while Alabama subjects withdrawals on full tax levies.

map of states that do and don't tax social security benefits

What is the most tax-friendly state to retire in?

The following are either states without an income tax for retirees and residents or states that levy the lowest tax rates on retirement income and taxable assets, like inheritance, property, sales, and estate.

  •  Alaska
  •  Florida
  •  Georgia
  •  Mississippi
  •  Nevada
  •  South Dakota
  •  Wyoming

How can I avoid paying taxes on retirement income?

One surefire way is to live in the states that don’t tax your retirement income. Another method is to use a Roth account and convert your traditional 401(k) or IRA assets. The difference is whether you pay taxes at a current tax rate and withdraw your savings tax-free or owe the taxes and pay them in the future (perhaps at a higher tax bracket) once you withdraw. 

If what you currently have is a traditional 401(k) or IRA, check with your plan administrator if you can convert a portion or all of it to a Roth 401(k) or Roth IRA account. Your contributions are taxed before they go into your Roth accounts, meaning withdrawals are tax-free.

You can do the same strategy to get a tax break for Social Security benefits. Social Security income becomes taxable when it reaches a certain threshold:

  • Up to 50% of the benefit for a single filer with an income between $25,000 and $34,000 and up to 85% for an income of over $34,000 
  • Taxable up to 50% for joint filers or couples if combined income is between $32,000 and $44,000 and up to 85% if it’s more than $44,000 

If your Social Security payouts are below the thresholds, you won’t owe any tax. But if you think you’ll go over the tax margin leading to you paying taxes, you can minimize what you owe through permissible subtractions, such as contributing to qualified retirement accounts that help drive down your Adjusted Gross Income (AGI). A lower AGI makes you eligible for more tax deductions and credits. 


If you live off of your Social Security check alone during retirement, consider moving into states that don’t tax your retirement benefits so you can make your savings last.

While you can choose to spend your golden years in any of the 15 states that don’t tax retirement income, you may need to recheck other tax regulations for assets, like properties, sales, and inheritance.