The 10 best states for early retirement

Where to take early retirement

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Thinking of retiring early? You might consider moving to one of these 10 states.

Financial advice company SmartAsset named these the best states for those entering retirement early, based on factors including effective income tax rates on people ages 55 to 64, state and local sales taxes, property tax rates and health care costs.

Of course, before you decide to retire early, make sure you've taken all the associated costs into account, said Andrea Blackwelder, certified financial planner and co-founder of Denver-based Wisdom Wealth Strategies. That means everything from health-care expenses to the cost of collecting Social Security early, if that's your intent. (If you take your Social Security benefits before your full retirement age that could reduce your monthly payment by as much as 30 percent for your entire life.)

"Make sure you have a plan for how you're going to spend that extra time," she said — and a plan for how you'll pay for it — before you start packing up any boxes. But if you're ready to make the move, these states may allow you to stretch your savings a little further.

—By CNBC's Fred Imbert
Posted 20 Oct. 2015

10. Texas

Houston, Texas.
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The Lone Star State's varied topography helped it crack the top 10, as early retirees can choose to live out their golden years in a major city like Houston or Dallas, or in the Big Bend of Far West Texas.

Texas' lack of state income taxes also makes it an attractive destination for early retirees, though its property taxes are among the nation's highest.

9. Florida

Miami, Florida
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Florida made the list, but did not take top honors.

"It was surprising because you're usually thinking about Florida when thinking about retirement since they have no income tax," said Nick Wallace, data editor at SmartAsset.

The Sunshine State has no income tax and its warm weather and numerous beaches make it attractive. However, the high cost of living of some areas, like metropolitan Miami and West Palm Beach, means retirees will have to be careful about where in Florida they settle.

8. Montana

John Elk | Getty Images

Montana is an affordable option for early retirees looking to spend the rest of their days enjoying "a back-porch view of moose and snow-capped peaks," SmartAsset said.

The state has no sales tax and boasts the eighth-lowest housing costs in the country, and its taxes on retirement income are relatively low.

"We found that a 60-year-old with $40,000 in income from retirement accounts would pay $1,483 in state taxes in Montana, which can also be deducted from federal taxes," the analysts said.

7. Pennsylvania

Philadelphia, Pennsylvania
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Pennsylvania is the only state from the Northeast to make the list, due in large part to its lack of taxation on all retirement accounts, the study said. For those over age 59½, pension income is also exempt.

6. New Mexico

Taos, New Mexico
Adina Tovy | Getty Images

"New Mexico was a bit of a surprise because they have an income tax," Wallace said.

However, the state also has various income tax rules that help out retirees, which make New Mexico a more attractive destination for early retirement, he said.

The study also found that a 60-year-old would pay an average of $5,150 for a silver health-care plan, the third-lowest amount in the country.

5. Mississippi

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What makes Mississippi such an attractive destination for early retirees?

It's simple: The state has the lowest cost of living, with living expenses 15 percent below the national average, SmartAsset found.

Mississippi also exempts all retirement income from state and local taxes.

4. Tennessee

Revellers outside BB King's Blues Club on Beale Street in Memphis, Tennessee where open containers of alcohol in the entertainment district is permitted.
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Tennessee, much like Texas, offers early retirees a slew of options for activities and places to live.

The Volunteer State is home to some of the best music and food in the country, as well as to one of the most storied college football programs in the country, at the University of Tennessee.

The state also has some of the lowest costs of living in the country, though its sales tax can go as high as 9.75 percent, one of the nation's highest.

3. Wyoming

Wyoming's Teton Mountains
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Early retirees looking to spend their golden years outdoors should consider moving to Wyoming, home of Yellowstone National Park and the Grand Tetons.

The state also has some of the lowest state and local taxes in the U.S., the study said, and a relatively low cost of living. Health-care expenses could offset those savings a bit though: The average cost of a silver health-care plan in Wyoming may cost more than $11,000 a year, the second-highest in the country, behind Alaska.

2. South Dakota

South Dakota
Rich Murphy | Sioux Falls Convention & Visitors Bureau

Aside from Mount Rushmore, South Dakota is a welcoming state for early retirees due to its low taxes, which are among the lowest in the country, and low housing costs.

However, its cold winters could dissuade potential retirees.

1. Kentucky

Kentucky bluegrass region.
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Kentucky has everything early retirees need for enjoying their golden years, according to SmartAsset.

Not only does it have the nation's fourth-lowest housing costs, but living expenses in the state's largest cities — Louisville and Lexington — "compare favorably to other major U.S. cities."

The state does have its own income tax, but SmartAsset said that few retirees pay the full amount while many "pay nothing at all," since Kentucky allows its residents to claim a deduction on the first $41,110 of their retirement income.

"And unlike similar rules in other states, there is no age restriction on who can claim the deduction," the study said.