Best States for Federal Retirees in 2026

Taxes, Healthcare, Lifestyle—What Really Matters

August 20, 2025

Retirement isn’t just about when you stop working — it’s also about where you go next.

For federal retirees, choosing the right state can mean the difference between stretching your pension and TSP comfortably…

Or watching them quietly erode under high taxes, healthcare costs, and shrinking local services.

Let’s break down the best states for federal retirees in 2026, based on what really matters.

Top Tax-Friendly States for Federal Retirees

These states either don’t tax your federal retirement income, or offer generous exclusions.

  • ✅ Florida – No state income tax, low property taxes, and no tax on Social Security, pensions, or TSP withdrawals.

  • ✅ Wyoming – No income tax, low sales and property taxes. Often overlooked, but a financial win for the right retiree.

  • ✅ Tennessee – No state income tax, and recent reforms make it increasingly attractive for low-cost retirement.

  • ✅ New Hampshire – No tax on wages or retirement income (though there’s still a tax on interest/dividends).

Also notable:

  • Pennsylvania – Exempts all federal pensions and distributions from IRAs and 401(k)-style accounts.

  • Mississippi – 100% exemption on all retirement income, including TSP, pensions, and Social Security.

Top States for Retiree Healthcare Access

Even with FEHB or Medicare, local provider networks matter.

  • 🩺 Minnesota – Top-rated Medicare Advantage plans and excellent hospital rankings.

  • 🩺 Massachusetts – Consistently ranked high for senior healthcare and low preventable hospitalizations.

  • 🩺 Utah – Affordable, high-quality care and strong access in urban areas.

  • 🩺 North Carolina – A growing destination for retirees, with expanding healthcare infrastructure and affordable long-term care.

Lifestyle & Cost of Living

Affordability, climate, and access to amenities make these states stand out in 2026:

  • 🏡 North Carolina – Combines coastal charm, mountain getaways, and moderate cost of living.

  • 🏡 Colorado – Great quality of life for active retirees—but choose wisely, as some areas are pricey.

  • 🏡 South Dakota – Low cost of living, no income tax, and quiet small-town feel for retirees who value space.

  • 🏡 Georgia – Retiree-friendly tax exemptions, mild winters, and a strong retiree community presence.

  • 🏡 Florida (again) – It’s not just the taxes—Florida also offers unmatched retiree communities, walkable cities, and beach access.

States You May Want to Avoid

While every retiree’s needs are unique, these states often rank low due to high taxes, cost of living, or healthcare access:

  • 🚫 California – High income taxes (including on federal pensions), expensive housing, and increasing retiree outmigration.

  • 🚫 New York – While some pension income is exempt, the overall tax and cost burden remains high.

  • 🚫 Illinois – Fiscal uncertainty and rising property taxes raise red flags, despite not taxing pension income.

Final Word

Before you pack your bags, remember:

  • Taxes aren’t everything. Consider healthcare, community, family, and future needs.

  • Some states don’t tax your TSP, but others may.

  • FEHB access can vary by region—check your plan’s provider network in advance.

📍 Retirement is personal—but where you retire can make your financial freedom go a lot further.

—FWR