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Investing

These 13 states don't tax your retirement income

Thinking about retiring? Your 401(k) is tax-exempt in 13 states.

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Where you choose to spend your golden years can influence how far your nest egg will go.

Retirement income isn't taxed in 13 states — meaning you can avoid paying Uncle Sam on distributions from your 401(k), IRA and pension payouts. In even more states, your Social Security payments are tax-exempt.

Below, CNBC Select outlines which states let retirees off the hook, as well as the best companies to open a retirement account with.

Compare offers to find the best savings account

States that don't tax retirement income

Because retirement income comes from different sources, there's not a single approach that all 50 states take when it comes to taxing it.

Some states don't have income tax, while others make exemptions for retirement income. Most states don't tax Social Security benefits, and there are a few states that tax 401(k) plans and IRA distributions but not pensions.

Of course, there are a lot of nuances surrounding the taxation of retirement income. Even if they tax distributions, almost all states offer some form of tax relief for retirees, whether it's a tax cap, an income limit on exemptions or other breaks.

And, as state tax laws are always changing, it's important to stay up-to-date with your state tax commission.

No income tax

Nine states don't tax any income, whether it's a paycheck or income from your 401(k), IRA, pension payments or Social Security check.

  • Alaska
  • Florida
  • Nevada
  • New Hampshire (does tax interest and dividends)
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

No income tax on retirement income

In addition, four states with income tax make an exception for retirement income like 401(k)s, IRAs and pension distributions, as well as Social Security benefits.

No tax on Social Security

Currently, only 11 states tax Social Security benefits and several of them are in the process of phasing it out.

These 39 states and the District of Columbia do not 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
  • West Virginia
  • Wisconsin
  • Wyoming

No tax on pensions

These 15 states don't tax pension income. (Note: Other states may provide a credit or exemption for a portion of pension income.)

  • Alabama (does tax 401(k) and IRA distributions)
  • Alaska
  • Florida
  • Hawaii (does tax 401(k) and IRA distributions)
  • Illinois
  • Iowa
  • Mississippi
  • Nevada
  • New Hampshire
  • Pennsylvania
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

Don't wait to set up a retirement account

The lowest-hanging fruit when it comes to retirement accounts is signing up for your employer's 401(k) — especially if they offer to match your contributions. The money that employees themselves contribute is taken from pre-taxed income, which lowers your taxable income for the year.

If your employer doesn't offer a 401(k) — or if you want to supplement it — a Roth IRA is a great way to maximize your retirement savings. You contribute after-tax dollars, so your withdrawals later in life are tax-free. Having both a 401(k) and a Roth IRA allows you to diversify your portfolio and take advantage of different tax benefits and withdrawal options.

You'll find the best Roth IRAs at big-name brokerages like Charles Schwab and Fidelity, while robo-advisors like Wealthfront also offer Roth IRAs as part of their automated investing options.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

  • Bonus

    None

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance according to the investment strategy chosen

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)

  • Bonus

    Find special offers here

  • Investment vehicles

    Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®

  • Investment options

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

Terms apply.

Wealthfront

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance

  • Bonus

    None

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

  • Educational resources

    Offers free financial planning for college planning, retirement and homebuying

Terms apply.

Bottom line

Tax laws shouldn't be the sole factor in determining where you spend your retirement, but they're certainly something to consider. Not all states treat retirement income the same, whether it's a 401(k), IRA or Social Security.

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Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every retirement article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investing products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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