3 Reasons Why Retiring in Texas Might Be Your Best Financial Move

Over the last few years, Texas has not only emerged as a popular tourist spot and hub for major American businesses but also a desirable retirement destination. If you’re nearing that time in your life, you may be curious if making the move to Texas is a financially smart move for you. 

Here’s what you need to know about living in Texas as a retiree on a fixed income. 

The Appeal of Retiring in Texas

From its warm climate, diverse cultural offerings, and scenic environments to its pension-friendly status, there’s a reason why Texas is experiencing an influx of retirees. In fact, Texas was the fourth most popular state for net migration among people over age 60 in 2022, according to a study released in 2024.

Take a look at some of the appealing aspects of the Lonestar State, and why its highly affordable status might put it on your short list of retirement destinations.

1. Lower Cost of Living  

Cost of living can vary widely in a big state like Texas since it’s made up of large metro areas (some more affluent than others) and lots of suburbs and small towns. But overall, it’s fair to say that Texas is a less expensive place to live than many other states in the nation.

According to 2023 numbers from the Bureau of Economic Analysis, the average personal consumption expenditures per capita in Texas was $52,229, which was lower than the national average of $56,202. For comparison purposes, California’s was $64,835 and Florida’s was $60,204.

When you drill down into specific places in Texas, you can also find some of the most affordable places to live in the nation. For example, in Kiplinger’s “Cheapest U.S. Cities To Live: U.S. Cities Edition” 2024 survey (based on government cost of living data), three Texas cities broke the top five (Edinburg, Harlingen, and Amarillo), and McAllen appeared lower down at No. 14.

2. Below Average Housing Costs

Housing costs in Texas are also lower than national averages. The average Texas home value in 2024 was $299,467, lower than the $357,469 average home value nationally. Renters can also find more affordable housing as the average rent in Texas was $1,255 per month, below the nationwide average of $1,560 (as of December 2024).

3. Favorable Tax Rates

Texas is one of just seven states with no individual income tax—and that’s a big deal for people living on a retirement budget. No income tax states like Texas are sometimes referred to as “pension friendly,” and tend to be popular with retirees. This is because residents don’t have to pay any taxes on their pensions, Social Security benefits, or distributions from IRAs or 401(k)s. This effectively gives you a bigger budget to work with.

State and local sales tax is also on the lower side in Texas. At 8.2%, the rate ranks 14th in the nation. For comparison, Oklahoma has an 8.989% state and local sales tax rate while Arkansas has a 9.448% combined rate. Also good news for retirees: Groceries, prescription drugs, and over-the-counter medicine are not subject to sales tax in Texas.

Potential Drawbacks

Despite all of the positive aspects of retiring in Texas, there are a few cons to consider as well.  

1. Natural Disaster Risks

Texas weather can be dramatically different depending on which part of the state you live. But more concerning is that Texas residents face the potential for extreme weather events from hurricanes to droughts and wildfires. The state’s cumulative cost of natural disasters reached over $400 billion from 1980 to 2023, the highest in the nation.

You may need to purchase extra insurance on your home if you live in Texas. Having a strong emergency fund is also crucial should you need to cover out-of-pocket expenses or evacuate for a period of time. 

2. Health Care Costs and Quality

One area where Texas falls short for seniors is with its health care system. Texas was ranked No. 38 for health in America’s Health Rankings 2024 Senior Report, based on social and economic factors, physical environment, behaviors, clinical care, and health outcomes.

Coverage-wise, Texas residents have both Medicare Advantage and Medicare Supplement plan options, however. Not every state offers both, so this is a plus. The average monthly Medicare Advantage plan premium in Texas for 2025 is $6.81, which is below the $17.97 per month average nationally.

3. Transportation and Accessibility Challenges

As the second most populous state, Texas has some transportation challenges since highway and road upgrades haven’t kept pace with the increasing number of drivers over the decades. State residents lose an average of 54 hours a year sitting in traffic. In addition, the Aging Texas Well Advisory Committee acknowledges that more needs to be done to accommodate people 65 and older who need public transportation services.

Again, access to transportation options may vary by locality. Metro areas tend to offer more public transportation, while some smaller suburbs can be more walkable or have better bicycle paths. Also worth exploring: If an area has volunteer driver programs that help seniors get to and from appointments. 

4. Higher Property Taxes

Although Texas is tax-friendly when it comes to income, it has higher property taxes than many areas. At 1.47%, Texas ranks seventh for property taxes paid as a percentage of owner-occupied housing value. 

The Bottom Line

Texas’ no-income-tax policy alone may put the state on your shortlist for retirement. It also has a lower average cost of living than many other places in the nation, so if you’re coming from a higher-cost area such as California or the Northeast, you will likely come out ahead financially.

That said, everything is bigger in Texas, including the number of options you have in terms of where to live. Compare lifestyle and cost of living carefully whether you choose to live in a city like Houston or Austin versus a small town like Fredericksburg. 

To help with the financial aspects of your decision, consider seeking counsel from a financial advisor who can help you make an informed decision that will fit your retirement finances.