Many retirees are also seeking places where state and local tax rates will erode less of their spending power. Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. And New Hampshire and Tennessee tax dividend and interest income only. There are five states without a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. The tax treatment of Social Security and pension benefits also varies by state. However, it's difficult to avoid all types of taxes. "When places don't have an income tax, they make up for it in other taxes," says Brock. "They can have very high sales or property tax."
Moving to a new place to save money isn't for everyone, of course. It can be difficult to leave behind a network of friends and relatives, and give up a house with memories tucked in each crevice. And the costs of buying a new home, selling the old one, and the move itself will take a chunk of the potential profits. People already living in places with a low cost-of-living or who don't have much equity in their homes will have little to gain by moving unless they significantly downsize. It also will take a considerable amount of research to make sure a more-affordable city will meet your needs for healthcare, recreation, culture, and transportation, and have weather that suits your tastes.
Diane Braybrook, 60, a former elementary school teacher, moved from Denville, N.J., to Belfast, Maine, when she retired in 2006. She says her housing costs, property taxes, and car insurance are all much lower in Belfast, even though she upgraded from a small house on a 50-by-100 foot lot in Denville to a half-acre of property in Belfast. Braybrook says the more modest culture in Belfast has also helped her to cut costs. "In the New York metro area, much of your being successful depends on the kind of car you drive and the clothes you wear and the golf course you belong to, and here, nobody cares," says Braybrook. "We don't spend as much money here because everyone's outlook on life is different. There's no pressure that you need to have the best and the flashiest."