For a retired couple bringing in $90,000 per year in pension income, choosing the right state to live in is one of the highest-leverage financial decisions available. The difference between the most and least retirement-friendly tax environments runs anywhere from $5,000 to $12,000 per year at this income level, and over a 20-year retirement, that gap compounds into a figure most investors would never leave on the table in their portfolios.
The total burden here means four separate things: state income tax on pension income, property tax, sales tax on everyday consumption, and estate or inheritance taxes on what passes to heirs. The 10 states below consistently rank at the top of the Tax Foundation and Kiplinger analysis for retirees in this income bracket, though each involves trade-offs that the savings figures alone do not capture.
The 10 States and What They Actually Save
| State | Pension Income Tax | Estate/Inheritance Tax | Key Trade-Off | Est. Annual Savings vs. NY/NJ |
| Florida | None | None | Higher property values in coastal markets | $8,000-$10,000 |
| Wyoming | None | None | Remote, limited urban amenities | $7,000-$9,000 |
| Nevada | None | None | Sales tax ~8.23% average | $7,000-$9,000 |
| South Dakota | None | None | Harsh winters, rural | $6,500-$8,500 |
| Texas | None | None | Property tax ~1.74% | $5,500-$8,000 |
| Alaska | None | None | Cost of living, remote | $7,000-$10,000 |
| Tennessee | None | None | Sales tax 9.55%, highest nationally | $5,000-$7,000 |
| Mississippi | Pension exempt | None | Limited healthcare infrastructure | $5,000-$7,000 |
| Alabama | Pension exempt | None | Sales tax varies by county | $5,000-$7,000 |
| Pennsylvania | Pension exempt | Inheritance tax on non-spouse heirs | Property tax varies by county | $4,500-$6,500 |
What the High-Burden States Are Actually Charging
A couple with $90,000 in pension income living in New York faces a state income tax liability of $3,500 to $4,500 after standard deductions, plus New York City taxes if applicable, with property taxes averaging above $6,000 statewide and running considerably higher in metro counties.
New York also imposes a state estate tax on estates above approximately $7.16 million, with a cliff effect that creates meaningful planning complications. Total combined burden at these income levels runs roughly $10,000 to $14,000 per year.
New Jersey’s burden is driven by property taxes, with an effective statewide average of approximately 2.47%, the highest in the country. On a $350,000 retirement home that runs roughly $8,600 per year alone. New Jersey eliminated its estate tax in 2018, but retains an inheritance tax on transfers to non-immediate family members, adding a planning dimension that the annual income comparison alone does not capture.
The Sales Tax States Where the Savings Narrow
Tennessee’s elimination of income tax is genuine, but its 9.55% combined average sales tax rate is the highest nationally. A couple spending $45,000 on taxable goods and services pays roughly $4,300 in sales taxes per year, meaningfully narrowing the headline savings. Nevada and Texas both run combined rates above 8%, a real annual cost the income tax comparison alone misses.
Wyoming and Alaska present the cleanest picture on both fronts. Wyoming’s combined average sales tax is approximately 5.36%, and Alaska imposes no state sales tax, though municipalities may levy local sales taxes. For retirees running the full four-component calculation, those two states consistently produce the widest gap against high-burden alternatives.
The Property Tax States That Require a Closer Look
Texas eliminates income tax but imposes property taxes averaging 1.74% effective statewide, roughly $6,960 per year on a $400,000 home. Florida is more competitive, at approximately 0.89% statewide, and its homestead exemption reduces the assessed value of primary residences, making it a stronger total-burden option than Texas at similar home values.
Alabama and Mississippi stand out at the opposite end. Alabama’s effective property tax rate of approximately 0.41% is among the lowest in the country, and Mississippi is similarly low, meaning retirees in both states benefit from pension exemptions and low property costs simultaneously, even with sales tax rates at 7% or above.
Pennsylvania’s Pension Exemption and Its Estate Tax Caveat
Pennsylvania’s pension exemption eliminates state income tax liability on the full $90,000 for a couple in this scenario, but the inheritance tax it imposes on transfers to children at 4.5%, siblings at 12%, and other non-spouse heirs at 15% should be included in the total burden conversation.
Spousal transfers are exempt, but for couples with assets passing to children, the tax meaningfully complicates the headline savings. For retirees focused on minimizing taxes on current income, Pennsylvania remains competitive. For those with estate planning as an equal priority, Wyoming, Florida, or Nevada offer cleaner alternatives where no estate or inheritance tax exists on any transfer.
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