Retiring any time can be a challenge, thanks to Americans' well-documented struggle to save enough to live on once the job goes away.
Where you live can make a big difference in how well you can manage financially, and once you've retired it's no different.
Retiring early can present a whole bunch of additional challenges, since drawing Social Security before full retirement age means there will be a smaller check to rely on for the rest of your life—and since you'll still have to pay for health care, choosing a state where those costs are lower can make a big difference in both the short and long runs.
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Then there are all those lovely state and federal retirement tax breaks that folks age 65 and up can qualify for.
Younger retirees? Not so much. But some states do better by younger retirees than others.
If relocation is a part of your retirement picture, and you just can't imagine working another day, it's a factor you should consider when making decisions about where you choose to live. If you're careful, you might still be able to parlay an early retirement into a happy and comfortable one.
SmartAsset thought, very wisely, that folks might like to know what's what across the country, and looked at six different metrics for all 50 states and the District of Columbia:
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effective income tax rates on people age 55–64
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state and local sales tax rates
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average effective property tax rates
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median annual housing costs
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nonhousing cost of living
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average annual cost of a silver health insurance plan
After doing the math, they came up with a ranking. Here are the 10 best states for early retirement.
1. Kentucky
Lots of states offer low or no taxes on some or part of retirement income, but Kentucky is one of the few that doesn't tie that to an age requirement.
That means that even a 62-year-old will qualify for the state's tax deduction for the first $41,110 in retirement income from a 401(k) or IRA.
Add to that a low cost of living, the fourth lowest annual housing costs in the country and, of course, the lure of the Kentucky Derby, and you have a pretty sweet place to head out to pasture—while you're still young enough to enjoy it.
2. South Dakota
While you might not be all that eager to spend the South Dakota winter snuggled up by a warm fireside, there are other reasons to consider the Mount Rushmore state as home once you're retired.
Like Kentucky, its annual housing costs are low—fifth lowest in the country—and when you add up all its taxes, they're also among the lowest in the U.S. That means you'll have more retirement dollars left over to pay for other things.
3. Wyoming
Absolutely grand scenery—think Yellowstone and the Grand Tetons—low taxes overall, and no state income tax make Wyoming pretty darned attractive as a prospective retirement destination, especially for outdoor buffs.
One caveat, however: the cost of buying health insurance as an individual will cost you—more than anywhere else in the country, in fact, except for Alaska. Silver plans can average more than $11,000 per year.
And, as an early retiree, you'll have to seek insurance since Medicare won't have kicked in yet.
4. Tennessee
No income tax here, and a low cost of living make the Volunteer State pretty enticing—and if you're a fan of country music, one word: Nashville.
But if you're a shopaholic, be warned: the sales taxes are the highest in the country.
5. Mississippi
The cost of living in Mississippi can save you, since it's not only the lowest in the country, it's more than 15 percent below the national average—a pretty hefty savings.
And the best part? All retirement income is exempt from state and local taxes here.
6. New Mexico
New Mexico actually limits the amount seniors can be charged for health insurance—to three times the rate for 20-year-olds.
So even though you'll have to seek out private coverage till Medicare kicks in, it won't cost you the way it will in other states.
A silver plan for a 60-year-old in the Land of Enchantment has the third lowest price tag in the U.S.
7. Pennsylvania
In general, if you want to stay in the northeast once you retire, you're going to pay for the privilege. But not in Pennsylvania.
All retirement account income is exempt from taxes, and early retirees, get ready to celebrate: if you're over age 59½, pension income is exempt too.
8. Montana
Your budget for housing will go farther in Montana than many other places, since here they're the eighth lowest in the U.S.
Add to that the fact that there's no sales tax and already Big Sky Country is looking pretty good.
Now consider that even though early retirees have to pay state tax on their income, the rate is relatively low—and they can deduct those taxes from their federal return.
9. Florida
Just about everybody already knows that Florida has no state income tax—a definite plus for both early and regular retirees.
And of course just about everybody also dreams of retiring on some sunny beach, sipping piña coladas and watching the waves roll in.
While you might be able to do that in Florida, you'll have to be careful which beach you choose, since housing costs in some parts of the state are higher than an early retiree's budget may be comfortable with.
In fact, you might be better off farther inland, such as in the Panhandle, and driving to the beach when the mood strikes.
10. Texas
Now if you're still dreaming of early retirement on that beach, you might want to consider one in Texas.
A relatively low cost of living, coupled with no personal income tax, make the Lone Star State pretty attractive to a budget.
But even here you'll have to be careful; property tax rates are among the highest in the country.
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