Key Takeaways

Retiring in a state that doesn’t tax 401(k) or pension withdrawals lets you keep more of your income and stretch your savings further.
Of the top 50 U.S. cities to retire, 18 are located in states with no state tax on retirement income.
From low housing costs to access to health care, arts, and entertainment, these tax-friendly cities provide a balance of financial security and quality of life.

When you’re on a fixed retirement income, every dollar counts. That’s why it pays to live in a state that won’t tax your 401(k) or pension withdrawals—you get to keep more of your money.

Earlier this year, Investopedia compiled a list of 50 of the best cities to retire in across the U.S., using data like the average cost of living and access to travel, health care, and entertainment.

Of the 50 top cities to retire in, 18 are located in states that don’t tax your 401(k) or pension withdrawals (or your Social Security benefits, for that matter). Here they are grouped by region.

Midwest
Gregory, South Dakota

Gregory is a small town with just over 1,200 residents. While the median household only earns $52,432 per year, these earnings stretch further due to low living costs. For example, average housing costs at the county level are just $589 per month. And the wider area offers “world-class hunting opportunities,” according to the town’s website.

Corning, Iowa

Corning is a slightly larger town with a population of nearly 1,500. On top of having no state tax on 401(k) and pension withdrawals, it offers a relatively low median county home value of $116,900. That’s nearly a fourth of the nationwide median home value of $410,800. It’s also the birthplace of Johnny Carson, who hosted “The Late Show” for nearly three decades.

Mason City, Iowa

Mason City is a medium-sized town with nearly 26,800 residents. It combines Midwestern affordability with modern amenities, like arts and entertainment. Embedded throughout the town is a significant collection of Prairie School-style architecture, including Frank Lloyd Wright’s last remaining hotel. Its Music Man Square honors its connection to the musical The Music Man, whose writer and composer, Robert Meredith Wilson, was born in Mason City. 

Northeast
Hermitage, Pennsylvania

Located on the Pennsylvania-Ohio border, Hermitage not only doesn’t have a state tax on retirement income, but the total average monthly tax costs for two adults and no children is relatively low at $560. This lets you keep more of your income. Hermitage is the site of the world’s only free golf course, as well as attractions including Buhl Farm Park and a state-of-the-art Food Waste to Energy facility.

Johnstown, Pennsylvania

Johnstown lies about 67 miles east of Pittsburgh, making it an easy day trip to the Steel City. This gives you access to urban amenities without the associated higher living costs. In fact, the median county-level home value in Johnstown is just $115,900. (If you sell a high-value home to move here, you might retire mortgage-free.) The town is home to a world-class polka festival as well as numerous options to enjoy the outdoors.

Altoona, Pennsylvania

Altoona is the largest town in Pennsylvania on our list with over 42,400 residents. It’s an ideal retirement destination for those seeking not only affordability but also access to amenities. Altoona is home to a national historic landmark called Horseshoe Curve, a 19th-century marvel of engineering that pushes trains through a dramatic curve. There’s also a regional delicacy called Altoona-style pizza and Amish farm markets to explore.

Conway, New Hampshire

Located on the New Hampshire-Maine border, on the southeastern edge of the White Mountain National Forest, Conway is a small town comprised of five villages. The outdoors offer many attractions, from Cathedral Ledge to Echo Lake, as well as several ski resorts. The Conway Scenic Railroad shuttles visitors and residents across the wider area—it’s a convenient option for day trips. Residents can enjoy its small town charm along with a relatively low tax burden. On top of no state tax on retirement withdrawals, the average monthly tax costs are $609.

Concord, New Hampshire

Concord is New Hampshire’s capital. It’s a medium-sized town with nearly 44,800 residents and lots of art, culture, history, and things to do. Its main street recently underwent a $14 million renovation—it’s bursting with dining options. Other attractions include the Capitol Center for the Arts, which hosts performances, and, for the science-minded, the McAuliffe-Shepard Discovery Center. There’s also the historic State House. Plus, you’re only one hour from Boston and 30 minutes from the Manchester-Boston Regional Airport.

Southeast
Natchez, Mississippi

Natchez is a small town on the Mississippi River. “Considered the birthplace of Mississippi,” its visitors website reads, Natchez “is known internationally as a quaint Southern town with a culture and heritage enriched by the contributions of many.” There are annual festivals, including the Balloon Festival Weekend in October. What makes Natchez stand out among retirement destinations is its incredibly low housing costs.

Fast Fact

The median county-level home value in Natchez, Mississippi is just $106,300, the lowest on our list.

Sebring, Florida

Sebring is a small town in central Florida that offers a humid subtropical climate with hot summers and mild winters. If you’re looking for a retirement destination where nice weather meets tax benefits, Sebring might be it. There’s much to explore, starting with the Sebring International Raceway. There are cultural options (including a collection of murals in a nearby town) and over 100 lakes in the area, as well as a state park.

Paris, Tennessee

Though it shares a name with a pricey city overseas, Paris, Tennessee, is remarkably affordable. It offers small-town charm coupled with a low tax burden. Not only will your retirement income not be taxed, but the average monthly tax costs for two adults and no kids is just $511. In addition to bakeries, parks, and other attractions, there’s even a replica of the Eiffel Tower in town.

Southwest
Port Arthur, Texas

Known as the official Cajun Capital of Texas, Port Arthur is a large town that sits on the Gulf of America. It’s about 90 miles east of Houston. Janis Joplin is a Port Arthur native—she’s featured in the nearby Museum of the Gulf Coast. If you enjoy Cajun seafood, water views, and low taxes, Port Arthur might be for you.

Eagle Pass, Texas

Located in southern Texas on the U.S.-Mexico border, Eagle Pass is a medium-sized town with over 28,300 residents and a low cost of living. The average monthly cost of food is $470, and average monthly county-level tax costs for two adults is also $470. The only casino in Texas, the Lucky Eagle Casino, is located just outside of town.

Longview, Texas

Longview is a large town about 130 miles east of Dallas. “Our rolling hills are a favorite for travelers of all kinds, whether they ride two, three or four wheels, on the road or off,” its website says. It’s known for its Great Texas Balloon Race and live downtown concerts, so if you’re looking for fun, entertainment, and a low tax burden, Longview is a great choice.

West
Pomeroy, Washington

Pomeroy is a small town in the southeast corner of Washington. Compared to the rest of the state, it has low monthly living costs: $716 for housing and $526 for taxes for two adults and no kids. It’s home to a historic main street.

Omak, Washington

Omak is located in the foothills of the Okanogan Highlands in north-central Washington. For a town of only about 5,050 residents, it has ample access to amenities. There are also several events to look forward to, including a Zombie Fun Run.

Carson City, Nevada

Carson City is a large town just a few miles from Lake Tahoe, the largest alpine lake in North America. Those who retire here have access to beautiful waterfronts and lake activities without the burden of a state tax on retirement income.

Evanston, Wyoming

Evanston is a small town in the southwest corner of Wyoming. On top of not having to pay state taxes on retirement income, residents don’t have to pay state taxes on any individual or corporate income. In fact, the state ranks 1st overall on the Tax Foundation’s 2025 State Tax Competitiveness Index.

How to Optimize Your 401(k) or Pension Withdrawals

To make the most of your 401(k) or pension withdrawals, follow these best practices:

Start with your RMDs: A required minimum distribution (RMD) is the amount you must withdraw from your 401(k) or pension after age 73 to avoid facing penalties. Start by withdrawing at least this amount.
Plan withdrawals around taxes: Withdraw from your 401(k) or pension before withdrawing from tax-free accounts like a Roth IRA to minimize your lifetime taxes.
Plan withdrawals around deductions: Some tax deductions for older adults have income limits. Plan your retirement income withdrawals accordingly.

The Bottom Line

Not having to pay state taxes on your 401(k) or pension withdrawals is a big advantage. It means that every month less of your money will go to the government and more will stay in your pocket. This helps your retirement savings last longer and can help you afford activities, trips, and other expenses you might not be able to afford otherwise. So it’s worth trying one of these places for retirement—you might be surprised at what you find.