Picking where to live after service or federal work is a big deal. For many people, the search for the best states federal retirees can feel overwhelming fast. You may have a FERS pension, military retired pay, Social Security, TSP savings, VA disability, or all of the above. Each state treats that income a little differently. On top of that, you still need good doctors, fair housing costs, and a place you’ll actually enjoy living.
Here’s the good news: you do not need to guess. If you want the fastest way to compare your own numbers, use the free retirement tax by state tool. And if you’re still on active duty and comparing duty stations or transition plans, the free BAH calculator is the easiest way to see your exact housing allowance by ZIP code.
Why retirement state rankings matter when you retire on FERS
A lot of “best states” lists are too simple. They focus only on state income tax. That matters, but it is not the whole story.
If you retire on FERS, your retirement income may come from several buckets:
- FERS basic annuity
- Social Security
- TSP withdrawals
- Military retired pay
- VA disability compensation
- Part-time work
- Savings or IRA income
A state may look cheap at first, then cost you more in other ways. For example:
- No income tax, but very high home insurance
- Low taxes, but weak hospital access
- Cheap homes, but high property tax
- Great weather, but long drives to VA care
That is why smart retirement state rankings look at four big areas:
- Taxes on retirement income
- Healthcare access and cost
- Housing and day-to-day living costs
- Quality of life, like safety, weather, and family access
Federal and military retirees also have special planning issues. You may need to keep FEHB in retirement, compare Medicare later, or understand how your military and civilian benefits work together. If you need a refresher on the pension side, our guide to FERS retirement benefits and overview of CSRS vs FERS are good places to start.
For official details, check the OPM FERS information page and IRS Publication 575, which covers pension and annuity tax rules.
Best states federal retirees should look at first
There is no perfect state for everyone. But some states show up again and again as strong federal pension friendly states because they do well in more than one area.
1. Virginia
Virginia is often strong for federal retirees because it has:
- Large federal and military communities
- Good hospital access in many areas
- Plenty of VA and military-connected services
- Four real seasons without extreme northern winters in many places
The downside is cost. Northern Virginia is expensive. But parts of Richmond, Roanoke, and the Shenandoah Valley can be much more affordable.
Virginia can be a smart fit if you want to stay near federal networks, contractors, and military support systems. It also helps if you may work part-time after retirement.
2. Florida
Florida gets attention for a simple reason: no state income tax.
That means no state tax on:
- FERS pension
- Military retired pay
- TSP withdrawals
- Social Security
That is a big win for many retirees. Florida also has many veteran services and retirement communities.
But there are tradeoffs:
- Home insurance can be very high
- Some areas have hurricane risk
- Healthcare access varies by county
- Housing prices in popular areas can be steep
Florida is often great on paper for taxes. It is not always great once you add insurance and housing.
3. Tennessee
Tennessee also has no state income tax. It often has lower housing costs than Florida, especially outside the hottest metro areas.
Pros include:
- No state tax on pension income
- Moderate cost of living in many areas
- Four seasons, but milder winters than the North
- Strong healthcare in places like Nashville, Knoxville, and Chattanooga
The biggest issue is that rural access can vary. If you need specialty care often, you will want to map hospitals before you move.
4. Texas
Texas is another favorite in many retirement state rankings.
Why people like it:
- No state income tax
- Large military and veteran population
- Big healthcare systems in major metros
- Many housing options
Why some retirees hesitate:
- Property taxes can be high
- Summers are brutal in many areas
- Insurance costs can rise in storm-prone spots
Texas can be a strong choice if you want tax savings and lots of space, but you need to run the full math.
5. North Carolina
North Carolina is one of the more balanced picks.
It offers:
- Good mix of coast, mountains, and mid-size cities
- Strong healthcare in several metro areas
- Moderate living costs in many towns
- Big military presence near bases and veteran communities
It may not be the lowest-tax option for every retiree, but it often scores well when you combine taxes, care, and lifestyle.
For broader location ideas, see our best places for veterans to live in 2026 and best no-tax states for military and federal retirees.
Federal pension friendly states: what taxes really matter
Let’s break this down in plain English. When people say “tax-friendly,” they often mean one of three things.
States with no income tax
These states do not tax wage income or retirement income at the state level. That usually includes pension income and TSP withdrawals.
Examples often include:
- Florida
- Texas
- Tennessee
- Nevada
- Wyoming
For a federal retiree, that can mean real savings every year.
States that exempt some or all retirement income
Some states do have an income tax, but they give breaks for:
- Federal pensions
- Military retired pay
- Social Security
- Retirement account withdrawals
This is where things get tricky. One state may fully exempt military retirement but still tax FERS. Another may exclude part of pension income based on age.
That is why broad tax headlines can mislead you. The better move is to check your exact income mix. The free retirement tax by state tool can save a lot of time here.
Taxes beyond income tax
Even if a state is kind to pension income, you still need to look at:
- Property tax
- Sales tax
- Home insurance
- Car insurance
- Estate or inheritance taxes in some cases
Here’s the thing: a state that saves you $2,500 in income tax but costs you $4,000 more in insurance is not really cheaper.
If your retirement income includes military pay or VA benefits, also review VA.gov, Military OneSource, and Military.com for updated benefit rules and state resources.
Healthcare and quality of life in retirement state rankings
Taxes get the headlines. Healthcare decides whether a place works long term.
Why healthcare matters more after retirement
Most federal and military retirees will use more care as they age. That means you should look at:
- Distance to primary care
- Access to specialists
- Hospital quality
- VA clinic or medical center access
- Medicare-friendly provider networks
- FEHB plan options if you keep FEHB
A lower-cost state is not a bargain if you drive two hours for cardiology.
If you plan to keep FEHB, read our FEHB plans and costs guide and FEHB premium increases breakdown. For military retirees and veterans, our VA healthcare eligibility guide can help you compare options.
Quality of life is personal
The best state for one retiree may be wrong for another. Ask yourself:
- Do you want to be near adult children?
- Can you handle snow or extreme heat?
- Do you want a city, suburb, or rural area?
- Will you need an airport often for family or VA travel?
- Do you want part-time work in retirement?
For many people who retire on FERS, quality of life comes down to more than money. A slightly more expensive state may still be worth it if you get better care, less stress, and closer family support.
Good sources for trends and federal retirement news include FedWeek, GovExec, and Federal Times.
Practical examples: comparing states with real numbers
Let’s look at a few simple cases. These are examples only, not tax advice. State rules change often.
Example 1: FERS retiree only
Maria is a retired GS-12. Her yearly income looks like this:
- FERS pension: $32,000
- Social Security: $24,000
- TSP withdrawal: $12,000
Total retirement income: $68,000
Now compare two rough state scenarios:
State A: no state income tax
- Tax on FERS: $0
- Tax on Social Security: $0
- Tax on TSP: $0
- Estimated state income tax total: $0
State B: taxes pension and TSP income
- Taxable income from FERS + TSP: $44,000
- If effective state tax is about 4.5%, estimated tax: $1,980
- Social Security may be exempt or partly exempt depending on state
That is nearly $2,000 a year. Over 20 years, that is about $39,600, not counting inflation.
But now add housing.
- State A homeowners insurance: $5,200 a year
- State B homeowners insurance: $1,800 a year
Difference: $3,400 more in State A
So even though State A has no income tax, Maria could still spend more overall.
Example 2: Military retiree with VA disability
James is an E-7 military retiree. His yearly income:
- Military retired pay: $36,000
- VA disability: $18,000
- Part-time job: $15,000
Total: $69,000
VA disability is generally tax-free at the federal level. Many states also do not tax it. But military retired pay treatment varies by state.
Scenario:
State C
- No tax on military retired pay
- No tax on VA disability
- State taxes part-time wages at 5%
- Tax on $15,000 wages = about $750
State D
- Taxes military retired pay and wages
- Taxable income: $51,000
- Effective state tax at 4% = about $2,040
Difference: about $1,290 a year
For James, State C may be much better if other costs are similar.
Example 3: Dual federal and military household
Angela and Rob have:
- FERS pension: $28,000
- Military retired pay: $30,000
- Social Security: $22,000
- TSP withdrawal: $20,000
Total: $100,000
If they move to a no-income-tax state, they may avoid state tax on $78,000 of pension and TSP income, plus possibly all Social Security. If they would have paid an effective 5% state tax elsewhere, that is around:
- $78,000 x 5% = $3,900 a year
That is real money. It could cover:
- A large share of FEHB premiums
- Travel to visit grandkids
- Extra TSP savings cushion
- Long-term care planning
This is where custom math matters. Use the retirement tax by state tool to compare your own mix. And if you are still serving, the BAH calculator can help you compare today’s housing costs while planning tomorrow’s move.
Common mistakes people make when choosing the best states federal retirees should consider
The biggest mistake is chasing “no income tax” without checking the rest of the budget.
Other common mistakes include:
- Ignoring property tax and insurance
- Moving far from good hospitals or VA care
- Forgetting that TSP withdrawals may be taxed differently than pensions
- Assuming every state treats military retired pay and FERS the same way
- Not checking whether a spouse needs special doctors nearby
- Picking a tourist area with high housing costs year-round
Another mistake is using old information. State tax laws change. So do FEHB premiums, Medicare costs, and local housing markets. Before you move, confirm details with current sources like OPM, VA.gov, and current reporting from Federal Times or GovExec.
How to rank states for your own retirement
Here’s a simple way to build your own retirement state rankings.
Step 1: List your income sources
Write down expected yearly amounts for:
- FERS or CSRS pension
- Military retired pay
- Social Security
- TSP or IRA withdrawals
- VA disability
- Part-time work
If you need help estimating pension income, use our high-3 salary guide and FERS retirement calculator guide.
Step 2: Compare state tax treatment
Look at each state’s rules for:
- Federal pension
- Military retired pay
- TSP or IRA withdrawals
- Social Security
The easiest shortcut is the free retirement tax by state tool.
Step 3: Price housing and insurance
Get real numbers for:
- Rent or mortgage
- Property tax
- Homeowners insurance
- Flood or wind coverage if needed
- Car insurance
Do not use national averages. Use the county or ZIP code you actually want.
Step 4: Check healthcare access
Map:
- VA facilities
- Military treatment options if eligible
- Local hospitals
- Specialists you may need
- FEHB plan coverage in that area
Step 5: Score quality of life
Give each state a 1 to 5 score for:
- Family distance
- Weather
- Safety
- Traffic
- Airport access
- Recreation
- Part-time job options
Step 6: Visit before you move
Spend at least a week there if you can. Visit in the worst season, not the best one.
Bottom line on federal pension friendly states
The best state is not always the one with the lowest tax bill. The best choice balances taxes, healthcare, housing, and the life you want to live.
For many people, strong contenders include Florida, Tennessee, Texas, North Carolina, and Virginia. But your answer depends on your income mix and medical needs. A retiree with only FERS may rank states differently than a retiree with military pay and VA disability.
Start with your numbers, not someone else’s list. Use the free retirement tax by state tool to see your personal results. If you are still on active duty or planning a move before retirement, try the free BAH calculator too. It is a fast way to compare housing costs and make smarter decisions with real data.