Want to Retire in Arizona? Here’s What You Need to Know.

Retirement

Aug 8

If you’re like most people trying to map out where to live during their golden years, it’s likely you’re perhaps considering Arizona as a potential retirement destination.

Should you ultimately choose the Grand Canyon State, know that you’ll follow in the footsteps of thousands of others; in 2022, Arizona experienced a net increase of over 23,515 retirees aged 60+. It’s thus the second-most popular retirement destination, as Florida is ranked #1 with over 77,000 people from this same age group flocking to the Sunshine State during this time (net growth).

Despite lagging behind Florida with respect to relocation popularity, Arizona has consistently ranked as the second-most popular retirement destination over the last several years. With this in mind, we decided to pull together this guide on key Arizona facts to help you chart your course to the Southwest.

Top reasons to retire in Arizona

Balmy weather and some really impressive views (the Grand Canyon, Sedona, and Hoover Dam immediately come to mind) are just a few reasons to retire in Arizona. Here are several others:

Other retirees are doing it—at the second-highest rate

We analyzed data from the five most recent SmartAsset studies to identify just how popular Arizona is as a retirement destination.

In doing so, we learned that a total of 862,924 people aged 60+ were represented in the studies’ “top 10 retirement destinations” (with locations varying slightly each year). About 16.4% within this group ended up in the state of Arizona, landing in second behind Florida (41.8%) and representing more than twice as many people as those who moved to North Carolina (8.5%)—which often landed in their top five on corresponding lists.

Arizona is a moderately tax-friendly state

Arizona is retiree-friendly with respect to Social Security benefits, inheritance, and estate taxes; with none of these in play, you can pocket additional money and leave more to your heirs.

However, Arizona does charge state income tax as well as taxes on most retirement sources such as 401(k)s and IRAs—hence its “moderate” tax-friendly status.

Let’s assume you’re a 65-year-old who earns $60,000 a year: $15,000 from Social Security, $30,000 from 401(k) and IRA distributions, and $15,000 from part-time employment. In this case, your total state taxes might rise as high as $1,125 (the 2024 state tax rate is 2.50%). While this rate is lower than most other states, your state income tax bill in Florida—the top-ranked retirement destination—would ring in at a whopping $0. While this may not seem like significant savings, every dollar counts if you’re on a fixed income: especially considering just how expensive retirement really is.

Nevertheless, know that federal and Arizona government retirement plans can also exempt up to $2,500 of your income, and retired military service members also enjoy an exemption on military retirement pay (up to the first $3,500).

Want to live in Arizona on a part-time basis until you fully retire? Keep in mind that to claim this as your primary state of residence in order to receive the aforementioned tax benefits, you’ll need to prove you spend at least 7 months in Arizona (within a calendar year) and take some additional steps as well.

To make up for some of this lost revenue, Arizona enacted a high sales tax rate—ranking 12th highest overall—with a combined state and local sales tax average of 8.379% (Florida comes in a little lower at 7.02%).

Low property taxes

Arizonians also pay very little in property taxes compared to other states (39 states tax at a higher rate, including Florida). Based on median home values, the average annual tax bill in AZ is $1,786; compare that to New Jersey with the worst homeowner tax obligations (averaging $9,345), and you can see why Arizona is so appealing in this regard.

Furthermore, the state offers property tax relief programs to help seniors: including the Senior Property Valuation Protection Option program (SPVF), an initiative that freezes the property valuation of residential homeowners aged 65+ who meet specific criteria (such as income limits and primary residency) for a 3-year period and can be renewed thereafter.

Homeowners insurance is relatively inexpensive

According to insurance.com, the national average homeowners policy cost—based on a dwelling coverage amount of $400,000 with a $1,000 deductible—is $2,601. The average rate for Arizona, meanwhile, is $1,906 and much less expensive than Florida (which rings in at $4,984).

As housing costs represent the biggest expense for retiree households, a move to Arizona can help many people (especially those relocating from more expensive states) reduce this.

Automobile insurance mimics the national average

Should you opt to retire in Arizona, know that your auto insurance rates will likely mirror the national average. More specifically, insurance.com reports that the average full coverage cost (100/300/100 with comprehensive/collision and a $500 deductible) is $1,812 per year in Arizona—a hair below $1,895 nationwide.

You’ll likely have more peers

Arizona is home to almost 1.3 million people ages 65 and up, comprising nearly 18% of the state’s population and ranking 4th among states of more than 5 million residents—behind only Florida, Pennsylvania, and South Carolina, per Journal of Consumer Affairs research. One large benefit of this is additional opportunities to socialize, making your post-work transition easier and going a long way with respect to happiness and longevity.

**Arthritis, asthma, and allergy sufferers fare fairly well—in some Arizona locales**

Arthritis sufferers should know that the weather has a moderate impact on arthritis (per the Cleveland Clinic)—but not as much as you may think. The good news, however, is that cold, wet weather (detrimental to this condition) is infrequent in Arizona.

The same can be said for retirees who suffer from asthma and/or allergies. While diverse factors can trigger and impact asthma, air pollution is often to blame. According to a recent State of the Air report published by the American Lung Association, Phoenix-Mesa continues to rank in the top ten most-polluted cities: meaning where exactly you reside in Arizona can make a big difference in this respect.

Those with allergies, meanwhile, may want to move closer to the desert—believing this climate boasts fewer pollen-releasing plants. However, the opposite is actually true; not only can Arizona fauna trigger related symptoms, but dust storms are known to occur and especially prevalent in the Phoenix-Tucson corridor.

The best advice here is to spend some time in Arizona and take note of any associated health effects before factoring these considerations into your relocation decision.

Top reasons to consider retiring outside of Arizona

As with all other retirement destinations, Arizona does have some drawbacks including:

Expensive housing (compared to the national average)

According to the Zillow Home Values Index, the median home value in Arizona—as of the date of this post—is $434,733: rising above the U.S. average ($363,438) and a little higher than Florida ($398,077). Nevertheless, this does fall below an average of $534,939 in New Jersey (where many of our readers hail from).

Mixed healthcare quality

We stumbled upon similar results across the board (despite different benchmarks) when querying various research studies on healthcare quality by state, with Arizona ranking in the middle or at the top of the bottom third compared to other states—in fact quite comparable to Florida in this regard.

More specifically, WalletHub ranked Arizona as the 34th best state for healthcare, and the Agency for Healthcare Research & Quality (AHRQ)—within the U.S. Department of Health & Human Services—currently ranks healthcare in Arizona as average (compared to all others). Nevertheless, U.S. News & World Report issued a ranking of #20 for Arizona in this regard.

Despite these not-so-stellar rankings, that’s not to say high-quality hospitals don’t exist in the state. The Mayo Clinic, consistently ranked as a top U.S. hospital, has a large footprint in Phoenix. Arizona also ranks 16th among all states for Medicare quality.

Expensive in-home healthcare services

Should you find yourself needing to fund long-term care, know that many of these services in Arizona—including in-home care and community/assisted living—are more expensive than the national average. For example, the monthly cost of a home health aide in Arizona is approximately $6,864 (rising above the national average of $6,292).

More prevalent consumer fraud

The Federal Trade Commission recently published data ranking Arizona #6 with respect to consumer fraud. Specifically, 86,066 reports were filed in 2023—1,216 reports per every 100,000 people. These numbers, however, are more favorable than those reported for #2-ranked Florida (with 1,563 reports per 100,000 residents).

The most common consumer fraud categories were identity theft (18%), imposter scams (16%), and credit bureau information furnishers (12%), and the top identity theft type was credit card fraud (44% of incidents).

Wildfires caused by dry heat

Arizona is prone to wildfires, especially during the summer due to extreme heat and the lack of rainfall. A recent report revealed that only four states (California, Colorado, Oregon, and Texas) rank higher, with most homes at risk of wildfire damage, and listed the most wildfire-prone places in Arizona for reference.

The need to budget for critters

Arizona’s warm temperatures also pose a moderate challenge with respect to insects and other unwelcome home invaders. In fact, the state sits on one of the most active subterranean termite belts in the country; homeowners are thus particularly susceptible to termite damage (per Action Termite & Pest). Whether you’re bug-averse or not, you may need to budget extra for pest-control services to keep these critters away (depending on where you live).

A lack of free education

Unlike Florida and North Carolina, Arizona generally doesn’t offer free classes for seniors—though some colleges and universities do have discounted tuition. For example, Arizona State and the University of Arizona both partner with the Osher Lifelong Learning Institute to offer no-credit classes to adults aged 50+ (with affordable membership costs).

Some of the best places to retire in Arizona

In many ways, researching and spending time in prospective locations is a lot like online dating; you persistently “swipe” (research) various “profiles” (destinations) in the hope of eventually finding “the one.” However, as numerous options will likely boast several key qualities you’re looking for—at least on paper—you won’t be able to identify any as a “keeper” until you meet them (by visiting) and spend time with them (by staying a while).

That said, you can rely on a few good resources out there to help narrow down your list. WalletHub’s “Best & Worst Places to Retire” list, for example, lists Scottsdale (#2), Tucson (#42), Chandler (#45), Phoenix (#47), Peoria (#67), Gilbert (#71), Mesa (#83), and Glendale (#94) among its top 100 cities.

In sum: Arizona as a retirement destination

Arizona is a great place to consider for your retirement relocation. Prior to making any decisions, however, we recommend spending at least a few weeks in the Grand Canyon State (or any other location of your choosing!) before ultimately deciding where to spend your golden years.

Want to know if you're on track for retirement? With our "Am I on Track?" service, you'll gain insights indicating how likely you are to reach your retirement goals and (if applicable) actionable steps to get you back on course.