Retirement is a door that an average of 10,000 people in the United States open every day. As a long-standing active duty service member of the Air Force, Army, Marine Corps, Air Force or Navy, your retirement journey may be right around the corner. The question is: What will be on the other side of that door when you finally hang up your military service uniform? In other words, in what state will you live out your golden years? This article will help you get a better understanding of the best places for military members to retire by referencing relevant information and statistics that may affect your decision.
Military veterans like yourself who are preparing for retirement are in an enviable position. Many people in the civilian population aren't wondering where they can retire, but if they have the means to retire at all. Indeed, just over half of non-retirees expect to have enough money to enter retirement once they reach that age, according to a Gallup survey. This compares to 80% of current retirees who do have the financial resources to maintain their standard of living.
Thanks to the Military Retirement Fund, full Social Security benefits, money building in your 401(k) and making consistent contributions to your savings accounts and investments, financial stability isn't a question for you.
What may be up in the air is where your military retirement will actually take place. To better determine the best states for veterans, it's helpful to think about some of the factors that will guide your decisions. These may include:
- Veteran population
- Health care access and affordability
- Tax environment
- State tax environment (i.e., states that do and don't tax military retirement pay)
- Cost of living
There are several others, but let's take a look at each of these. The details can provide you with added context on what states are the best for veterans coming off of many years of accomplished military service.
There's a natural inclination to want to live in a location where the people share the same values or come from a similar background. Fortunately, all 50 states have a robust population of veterans who served in the armed forces, but veteran representation is more robust in some states than in others. Here are the top 10 states where the population has the highest share of veterans, according to World Population Review. As you'll see, several of the states have comparative low overall population relative to bigger states like California and Texas:
- Alaska (9,000 per 100,000 people)
- Virginia (7,843 per 100k)
- Montana (7,808 per 100k)
- Wyoming (7.729 per 100k)
- Maine (7,632 per 100k)
- West Virginia (7,435 per 100k)
- Hawaii (7,275 per 100k)
- New Hampshire (6,971 per 100k)
- New Mexico (6,874 per 100k)
- South Carolina (6,835 per 100k)
Health care access and affordability
While the United States' health care system is far from perfect — be it related to the cost of prescription drugs or limitations in terms of access — people from all over the world come to the United States for the quality of medical services that are available here relative to other parts of the globe. Veterans, however, can leverage several different options for their health care needs, from TRICARE to the Department of Veterans Administration. Additionally, some veterans with catastrophic disabilities that occurred in the line of duty can leverage priority medical services free of charge.
There are a variety of ways to assess the health system, but when it comes to the best states for health care among retirees overall (meaning seniors, or those who are over 65 years of age), Minnesota scores the highest, according to a study conducted by MedicareGuide. Researchers came to this conclusion by assessing cost, access and quality and assigning scores to those categories. On a scale of 1 to 100, with 100 being the best — Minnesota received a score of 66.70. Here's a list of the remaining top 10, with their respective scores in parentheses:
- North Dakota (65.02)
- Massachusetts (62.17)
- California (61.72)
- Nebraska (61.55)
- Hawaii (60.85)
- Montana (60.61)
- Colorado (60.53)
- Iowa (60.41)
- Connecticut (60.02)
Contrary to what Benjamin Franklin is believed to have said, taxes aren't guarantees in life after all — not when it comes to certain kinds, anyway, such as sales taxes and state income taxes. The same goes for military retirement pay. In fact, more than half of the United States don't levy taxes on military retirement pay benefits. Some of these states include Kentucky, West Virginia, North Carolina, Illinois, Utah, Indiana, Iowa, Kansas, Maine and Massachusetts, according to the website MilitaryBenefits.info. Indiana and Utah only recently stopped taxing military retirement pay; the respective policies went into effect this past January in the Hoosier State and in January of 2021 in the Beehive State.
New Hampshire, Florida, Texas, Wyoming and a few others (i.e., South Dakota, Tennessee, Washington, Nevada, Alaska) won't tax military retirement pay either because they have no state income taxes.
Then there are those states that do tax military retirement earnings, but only partially. For example, in Rhode Island, up to $15,000 of retirement income is exempt from taxation, provided they have reached the age at which they can start receiving the full allotment of their Social Security benefits. And in South Carolina, veterans who were on active duty for at least 20 years can be exempt from up to $3,000 in taxation through their 65th birthday. The exemption amount increases to $10,000 thereafter.
Cost of living
The cost of daily life seems to always go in one direction: up, albeit gradually when you look at the price of fuel, food, electricity and other expenses from one year to the next. But as you've undoubtedly noticed, you're likely spending considerably more on products and services these days than you were as recently as a few months ago. This is largely a product of inflation. In fact, the last time prices throughout the United States rose quite so exponentially was back in the early 1980s, according to statistics from the Labor Department.
Given these economic realities, you're bound to be paying more no matter where you decide to settle down in retirement, at least for the foreseeable future. However, how much more you spend will mostly depend on the state you select.
Thanks to all the permanent changes of station that occur in a lengthy military career, veterans like yourself probably have a general idea of the regions of the country that are more affordable than others. For example, groceries, housing, fuel and other expenses tend to be cheaper in the South than on the East Coast or West Coast. World Population Review has a list of the specific states where the price of living is lowest. The least expensive state in the country for residents is Mississippi, the study found. With an average cost of living index score of 86.1 (factoring in expenses like groceries, housing, utilities and transportation), Mississippi is the best state to live in for budget-minded Americans. Here are the other states where your dollar goes further:
- Arkansas (86.9)
- Oklahoma (87)
- Missouri (87.1)
- New Mexico (87.5)
- Tennessee (88.7)
- Michigan (88.9)
- Kansas (89)
- Georgia (89.2)
- Wyoming (89.3)
Perhaps unsurprisingly — especially if you've lived there — the cost of living is highest in California. Even though it's the most populous state in the country, the Golden State is the most expensive one to live in, with a combined cost of living index score of 151.7.
But in terms of the states where inflation has been the most impactful, Georgia has experienced the steepest rise in prices. More specifically, the Atlanta metropolitan area saw inflation climb nearly 10% in 2021, The Wall Street Journal reported from Labor Department figures. Economist Brent Meyer, who works for the Federal Reserve Bank of Atlanta, attributed the rapid rise in inflation in Georgia's largest city to the cost of real estate, specifically rent. High demand and limited supply have led to landlords charging more for apartments.
The pace of inflation has been slowest in California, particularly the Bay Area, the study also found. This may seem counterintuitive, given the cost of living is highest in this part of the country. However, economists attribute this to current migration trends. California is routinely among those states with the highest exit rates, meaning more people are leaving the state than relocating there.
What are the best of the best states for military retirees?
From fun things to do and job opportunities to limited crime and walkable cities, there are an endless number of categories that factor into your decision about where to retire. You may value health care affordability more than you do the tax environment or the depth of the veteran population. Because of this, only you can decide which state is the best state for you and your family. But what about when all those categories — including taxes, cost of living, health care, employment and lifestyle — are put together? Is there one state that stands out? The website VeteranLife may have the answer — only it's several states.
VeteranLife recently combed the internet for surveys detailing which states are the most ideal for military retirees, based on the things that the veteran population highly value. According to the website's findings, four states tied, cited more frequently than all the others. They included:
These four states were referenced on at least three "best states for military retirement" lists around the internet, including by Business Insider, U.S. News & World Report and AARP. Six others appeared on at least two lists. Alaska, Idaho, Iowa, Minnesota, Texas and Utah were those six.
How to decide if the time is right to retire
It may be that you already have a good sense of where you want retirement to take place but can't decide on when to bring your military service to an end. In other words, even though you know when you're eligible to retire, the time may not be right. That's a decision that should be left to you and your family. If the ultimate determination comes down to finances, there's a general rule of thumb that you can go by. According to economists and financial gurus, during retirement you should aim to be earning around 80% of what you do now. Let's say your annual salary is $75,000. When you multiply that number by 80, that amounts to $60,000 (i.e. 75,000 x .80).
Of course, you may be able to live comfortably on less than this if, in retirement, you won't have the expenses that you do now. For instance, you may have a child who is old enough to live on their own, perhaps you're not far away from paying off your mortgage or car loan. You might even have more income streams in retirement than at the present time.
Even when you're in a comfortable position financially, there may come a time in which you need a military loan. Omni Financial is there for you — in retirement too. In addition to active duty military loans, we also provide personal loans to career-retired service members regardless of their branch. For more information, contact us today or visit us at an office near you.