10 Great Retirement Cities in the U.S.

The following is from Kiplinger's Personal Finance by Caitlin Dewey 

Deciding where to retire presents an exciting challenge. The best cities for retirement need to offer appealing amenities — good quality of life, ample health care options and plenty of things to do — on a fixed-income budget. To create our list of best cities for retirement, we started by screening for affordability. The cost-of-living index for retirees has to score near or below 100, the U.S. average. Top cities also must offer tax perks to retirees, such as exemptions on retirement income, and have lower state taxes per capita than $2,424, the national average. Because health and comfort level are key to a high quality of life, we made sure that these cities offer access to quality medical care.

To create our list of best cities for retirement, we started by screening for affordability. The cost-of-living index for retirees has to score near or below 100, the U.S. average. Top cities also must offer tax perks to retirees, such as exemptions on retirement income, and have lower state taxes per capita than $2,424, the national average. Because health and comfort level are key to a high quality of life, we made sure that these cities offer access to quality medical care.

Birmingham, Ala.
Metro population: 1,128,047
Retiree cost-of-living index: 90.2
They call Alabama "sweet home" for a reason: Living costs are low, sunny days are abundant, and taxes per capita fall $700 below the national average. Alabama exempts most retirement income from state income taxes, and older homeowners don't pay property taxes. Medical costs are nearly 15 percent lower than the national average. Birmingham, the state's largest city, is home to an opera, orchestra and ballet, as well as a segment of the renowned Robert Trent Jones Golf Trail.Biggest drawback: The summer heat can be stifling.

Tucson, Ariz.
Metro population: 980,263
Retiree cost-of-living index: 95.5
Tucson's dry, sunny weather and low income tax rates have made it attractive to generations of retirees. Arizona fully exempts Social Security benefits from income taxes, as well as up to $2,500 of some government pensions. Living costs are also low here, under both the national average and the costs of popular Southwest cities such as Phoenix and Palm Springs, Calif. The area is well known for its 22 golf courses, all of which you can play year-round. Tucson also boasts a symphony, opera and ballet, as well as noted art museums and photo galleries.

Manchester, N.H.
Metro population: 400,721
Retiree cost-of-living index: 118.3

Thanks to the absence of income, sales, estate and inheritance taxes, Manchester is one of the most tax-friendly cities in the U.S. for retirees. While the overall cost of living skews a bit above average because of things such as housing and utilities, health care is cheap. The city is also known for its extensive parks system and the Currier Museum of Art. If you get bored with the boutiques, restaurants and jazz festivals in Manchester's charming downtown, Boston is only an hour away, and New York and Montreal fall within day-trip range.

New Orleans
Metro population: 1,167,764
Retiree cost-of-living index: 96.8
New Orleans' living costs fall below the national average, and the Louisiana tax code is retiree-friendly. Most pensions are exempt from state income taxes, personal income tax rates are low, and property taxes are among the lowest in the nation. Although Hurricane Katrina hit the city hard in 2005, both the population and the economy are rebounding.

Spokane, Wash.
Metro population: 471,221
Retiree cost-of-living index: 93.7
With no state income tax, below-average living costs and 260 sunny days a year, picturesque Spokane makes a budget-friendly choice for retirees looking to get away from it all. Located between the Cascade and Rocky mountains, the city is a mecca for outdoor enthusiasts: 76 lakes, five ski mountains and 4,100 acres of city parks lie in the region, as do thousands of acres of cedar forests and state parks. Spokane is a hub in the Northwest health care network, with six major hospitals and 900 physicians within the city limits. While Washington does charge a high sales tax — 6.5 percent statewide and nearly 9 percent in Spokane — groceries, prescription drugs and many other essential items are exempt.

Charleston, S.C.
Metro population: 664,607
Retiree cost-of-living index: 102.8

South Carolina's state taxes are the lowest in the country, one of the many budget-friendly factors that make Charleston a good home for retirees. There are no taxes on Social Security benefits in the Palmetto State, which also provides a $15,000 retirement income deduction for people over 65. Retirees can spend their savings in one of historic Charleston's many theaters or soul food restaurants. The city is known for its mild climate, and tourist draws such as Savannah, Hilton Head and Myrtle Beach are just two hours away by car.

Knoxville, Tenn.
Metro population: 698,030
Retiree cost-of-living index: 90.1
Few cities can stretch fixed-income budgets as far as Knoxville, where living costs for retirees are the lowest in our top 10. If that isn't enough, note that the state has no income tax, and taxes per capita fall more than $700 below the national average. While hardly a booming metropolis, Knoxville is home to a thriving American music scene, a symphony orchestra, an annual opera festival and 13 golf courses. The city's proximity to the Blue Ridge Mountains and Great Smoky Mountains National Park also makes it ideal for fishing, hiking and other outdoorsy activities.

Palm Bay, Fla.
Metro population: 543,376
Retiree cost-of-living index: 99.7

Palm Bay's senior population has ballooned to 20.2 percent, and for good reason. The Sunshine State has no income tax, and taxes per capita fall well below the national average. There are 29 parks within the city limits, and the surrounding county boasts 10 golf courses and nine Atlantic Ocean beaches. Port Canaveral, a 50-minute drive from Palm Bay, is the second-busiest cruise port in the world. As if that weren't enough, the average temperature is a pleasant 72 degrees.

St. Louis
Metro population: 2,812,896
Retiree cost-of-living index: 93.3

St. Louis may not rank as an obvious retirement choice, but the spirited midsize city offers some pretty senior-friendly amenities: low living costs, a laid-back Midwestern atmosphere and full income tax exemptions for Social Security benefits starting in 2012. St. Louis' riverfront, which includes several museums, a casino and more than 200 restaurants, is in the midst of several large-scale development projects. And the city's central location makes it easy to visit grandkids on either coast.

Winston-Salem, N.C.
Metro population: 477,717
Retiree cost-of-living index: 92.2

Winston-Salem might not enjoy the same name recognition as, say, Charlotte, but living costs are nearly 8 percent below the national average, and Social Security benefits are exempt from state income taxes. Winston-Salem doesn't lack things to do, either: Its theater and visual arts heritage earned it the nickname "The City of the Arts."