Have you called the midwest home for years and are debating staying put or moving somewhere warmer in retirement? Or maybe you’re living in a high-cost area, wondering if there’s a place where your nest egg and your time might stretch a bit further?
In this article, we’ll look at the details you should know about retiring in the Midwest, including the states with the most tax-friendly retirement benefits, cost of living, and healthcare considerations to keep in mind.
Why Is the Midwest a Smart Choice for Retirement?
Now that you aren’t tied to your daily commute, you’re finally in control of where you spend your retirement. Here are a few benefits that the Midwest offers its retirees:
Cost of Living Advantages
Thanks to our housing prices, the biggest benefit of the region is how it can improve the tempo of your retirement spending. According to the National Association of REALTORS®, the median home price in the Midwest is currently $302,100, which is nearly $96,000 less than the national median of $398,000. If you’re moving from the West Coast, where the median is $603,100, or the Northeast at $479,800, you could potentially unlock hundreds of thousands of dollars in equity. This allows your retirement savings, whether it’s $750,000 or over $1,000,000+, to stretch much further.
Taxes and Retirement Income
The Tax Foundation cites that retirees in California or New York have top state income tax rates of 10.9% to 13.3%. Other neighboring states in the East or West have similar tax burdens that can take a chunk out of your monthly withdrawals.
In contrast, several Midwest states have shifted to low, flat-tax systems that make your income much more predictable. For example, as of January 1st, 2026, Ohio moved to a flat 2.75% rate for non business income over $26,050, and Indiana sits at a steady 2.95%.
According to research by Kiplinger, Illinois and Iowa (for those 55+) don’t tax Social Security benefits, 401(k) distributions, or private pensions. Michigan has also joined the chorus, phasing out its pension tax so that most private retirement distributions are fully exempt by this year.
Later in this article, we will break down the state by state Midwest tax specifics you should know as a retiree.
Healthcare Access
The Midwest has some of the top health care facilities in the world for 2026 according to U.S. News & World Report and Newsweek:
- Mayo Clinic (Rochester, MN): Ranked as the No. 1 hospital in the world for the eighth consecutive year, it holds No. 1 national rankings in Diabetes & Endocrinology and Gastroenterology (GI) & GI Surgery.
- Cleveland Clinic (Cleveland, OH): Ranked the No. 2 hospital in the United States and No. 2 in the world for its digital innovation in the Smart Hospitals category. It’s globally renowned for its leadership in Cardiology, Heart & Vascular Surgery and Urology.
- Northwestern Memorial Hospital (Chicago, IL): Recognized as the top-ranked hospital in Illinois for 14 consecutive years, it holds top-10 national rankings in specialties such as Neurology & Neurosurgery, Geriatrics, and Obstetrics & Gynecology.
- University of Michigan Health (Ann Arbor, MI): Ranked as the No. 1 hospital in Michigan, it is a global leader in Ophthalmology, Ear, Nose & Throat, and Rheumatology.
- Barnes-Jewish Hospital (St. Louis, MO): Ranked No. 1 in Missouri, it is nationally recognized for excellence in 11 specialties, including Cancer care, Diabetes, and Pulmonology & Lung Surgery.
Whether you need routine care covered by Medicare or treatment for a chronic condition, having these institutions nearby in retirement can be a huge relief.
What are the Best Cities & Towns to Retire in the Midwest?
When selecting these cities, I didn’t just look for the lowest price tag or tax bill. As a CFP® professional, I reviewed these locations based on cost of living, lifestyle amenities, tax benefits, and how often they’re placed on best of lists for retirees.
Top Small & Mid-Size Cities for Retirees
- Midland, MI: Currently ranked the No. 1 Best Place to Retire in the U.S. for 2026 by U.S. News & World Report. It’s known for its affordability with median home values roughly $164,000 below the national average and amenities like the 1,200-acre Dow Gardens.
- Fort Wayne, IN: The Motley Fool highlights its housing affordability score and recreational draws like the Promenade Park riverfront and the Fort Wayne Museum of Art.
- Sioux Falls, SD: Recently ranked No. 16 on the U.S. News 2026 list, this city is a financial powerhouse for retirees because South Dakota doesn’t tax Social Security, pensions, or IRA distributions.
- Dayton, OH: I’m a bit biased here, but the data backs it up. Dayton is a leader in U.S. housing value with strong cultural roots. Between the Dayton Art Institute, the Dayton Dragons’ energy downtown, and the Schuster Performing Arts Center, you get a big stage lifestyle at a price point that recently helped Ohio cities dominate the top 20 list for affordable retiree markets.
College Towns with Retirement Appeal
- Ann Arbor, MI (University of Michigan): While the city’s high cost of living often keeps it off budget lists, it’s a strong choice if you want world class culture and healthcare. For 2025-2026, University of Michigan Health is ranked as the No. 1 hospital in Michigan and a top-20 facility nationwide.
- Iowa City, IA (University of Iowa): This town is a top performer in Forbes’ Best Places to Retire. As a UNESCO City of Literature, it offers sophisticated amenities induding the Hancher Auditorium, which Billboard recently named one of the Top Music Venues in the country for 2026.
- Lawrence, KS (University of Kansas): A classic college town recognized by Forbes as one of the 25 Best Places to Retire in 2025, with a median home price of $318,000 and a strong local economy.
- Lincoln, NE (University of Nebraska): U.S. News & World Report ranks this as a top destination for retirees who value a vast 130-mile trail network and a big city feel with a cost of living nearly 8% below the national average.
Affordable Urban Centers with Strong Amenities
- St. Louis, MO: This humble midwest city features a world-class symphony and Forest Park, which at 1,300 acres is roughly 500 acres larger than Central Park in NY. Most of the park’s premier institutions, including the St. Louis Zoo and Saint Louis Art Museum, offer free admission.
- Cleveland, OH: The Motley Fool ranks it as the top Midwest city to retire in for its high quality of life and access to the world-renowned Cleveland Clinic as well as lake front activities.
- Chicago, IL: If you can deal with traffic, Chicago is a surprisingly affordable major city that has elite food, culture, and quality medical care at Northwestern Memorial Hospital.
- Milwaukee, WI: Recognized for its walkable historic districts and a cost of living that sits below the national average. Milwaukee is known for its festival season on the Lake Michigan shoreline.
What to Expect in Retirement Costs
Is Housing & Real Estate Affordable in the Midwest?
As stated earlier, according to the National Association of REALTORS®, the median home price in the Midwest is approximately $302,100 as of 2026. This is nearly $96,000 less than the national median of $398,000. But of course affordability varies state by state.
To give you a closer look at the region, here is the median home sale price for each state as of Jan 2026 according to Zillow compared to the national median home value of $398,000.
| Midwest State | Median Sale Price (2026) | vs. National Median ($398k) |
| Ohio | $216,833 | – $181,167 |
| Iowa | $220,500 | – $177,500 |
| Indiana | $239,500 | – $158,500 |
| Michigan | $247,333 | – $150,667 |
| Missouri | $260,333 | – $137,667 |
| Illinois | $260,500 | – $137,500 |
| Kansas | $264,566 | – $133,434 |
| Nebraska | $266,633 | – $131,637 |
| North Dakota | $283,333 | – $114,667 |
| Wisconsin | $290,517 | – $107,483 |
| South Dakota | $308,333 | – $89,667 |
| Minnesota | $324,833 | – $73,167 |
*Source: https://www.zillow.com/home-values
Looking at the $181,167 gap between Ohio’s median price and the national median, it’s clear why equity migration is such a powerful trend. For example, if you’re a retiree moving from a high-cost area, this housing cost gap could be moved into a brokerage account to generate thousands more in annual income.
What Will I Pay for Healthcare Expenses in the Midwest?
According to recent research by Fidelity, a healthy 65-year-old couple retiring in 2026 can expect to spend approximately $345,000 on out-of-pocket healthcare costs throughout their retirement. This figure includes Medicare premiums and out-of-pocket expenses like prescription drugs, co-pays, and deductibles, but it excludes the cost of long-term care.
The Missouri Economic Research and Information Center has compared the cost of healthcare for each state as of 2025. Their healthcare cost index measures the relative cost of medical services compared to a baseline of 100.0. Using their most recent data, you can see that most Midwestern states have a slightly lower cost of healthcare with Michigan leading the way at a 10% average discount rate.
| Midwest State | Healthcare Index 2025 | vs. National Baseline |
| Michigan | 90.0 | –10.0% |
| Kansas | 94.5 | – 5.5% |
| Iowa | 95.9 | – 4.1% |
| Indiana | 96.3 | – 3.7% |
| Ohio | 97.0 | – 3.0% |
| Nebraska | 99.6 | – 0.4% |
| Wisconsin | 99.8 | – 0.2% |
| Missouri | 100.3 | + 0.3% |
| Minnesota | 102.4 | + 2.4% |
| Illinois | 104.1 | + 4.1% |
| South Dakota | 106.5 | + 6.5% |
| North Dakota | 108.8 | + 8.8% |
*https://meric.mo.gov/data/cost-living-data-series
Which Midwest States Tax Retirement Income?
Most Midwest states have stopped taxing your Social Security, but they vary widely on how they treat your 401(k) and IRA distributions.
2026 Midwest Retirement Income Tax Guide
| Midwest State | 2026 Income Tax | Social Security Taxed? | Pensions Taxed? | IRA Distributions Taxed? |
| South Dakota | 0.00% None | No | No | No |
| North Dakota | 0.00% – 2.50% | No | No** | Yes |
| Ohio | 0.00% – 2.75% | No | Yes | Yes |
| Indiana | 2.95% Flat Rate | No | Yes | Yes |
| Iowa | 3.80% Flat Rate | No | No** | No** |
| Michigan | 4.25% Flat Rate | No | No** | No** |
| Missouri | 0.00% – 4.70% | No | No** | Yes** |
| Illinois | 4.95% Flat Rate | No | No | No |
| Kansas | 5.20% – 5.58% | No** | Yes** | Yes |
| Nebraska | 2.46% – 4.55% | No | Yes** | Yes |
| Wisconsin | 3.50% – 7.65% | No | Yes | Yes |
| Minnesota | 5.35% – 9.85% | Yes** | Yes** | Yes |
* https://www.kiplinger.com/retirement/602202/taxes-in-retirement-how-all-50-states-tax-retirees
**Notes exceptions and modifications including age requirements, income limits, and types of pensions.
Some states with a lower income tax rate use property taxes to bridge their budget gap. Illinois is a good example: it offers a 0% tax on your Social Security and pension income but has the highest effective property tax rate in the region at 2.01%. Conversely, Missouri has both a low income tax rate on retirement income and an average effective property tax rate below 1.0%.
2026 Midwest Property Tax Comparison
| Midwest State | Avg. Effective Property Tax Rate (2026) | Estimated Annual Tax on a $332.7k Home |
| Indiana | 0.74% | $2,461 |
| Missouri | 0.85% | $2,814 |
| North Dakota | 0.99% | $3,286 |
| Minnesota | 1.02% | $3,392 |
| South Dakota | 1.06% | $3,521 |
| Michigan | 1.25% | $4,172 |
| Kansas | 1.29% | $4,286 |
| Ohio | 1.31% | $4,371 |
| Iowa | 1.39% | $4,634 |
| Wisconsin | 1.42% | $4,734 |
| Nebraska | 1.49% | $4,949 |
| Illinois | 2.01% | $6,694 |
*https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585
What are the Pros and Cons of Retiring in the Midwest?
The Midwest, just like every other retirement destination has a mix of good and bad features. Here is a summary of the practical and personal trade-offs you should keep in mind.
The Pros and Why The Midwest is Great for Retirees
- Purchasing Power: The most compelling part of a Midwestern retirement is our low cost of living. Whether you want to dine in a revitalized downtown like Des Moines and Cleveland or you’re looking for world class culture with the St. Louis Symphony or Iowa City’s literary scene, the Midwest offers a high quality lifestyle without the coastal price tag.
- Access to World-Class Healthcare: As a retiree, you’re living within a short drive of famous medical institutions including the Mayo Clinic, Cleveland Clinic, and Northwestern.
- Ease of Living: If you can’t imagine fighting traffic in Houston, Atlanta, or LA in retirement, the Midwest might be your answer. You’ll find shorter commutes, ample parking, and a friendly community where neighbors still look out for one another.
The Cons and What to Prepare For in Retirement
- Winter: It’s fair to put this at the top of the list. Midwest winters can stretch from November into April. We get occasional warm days in March, but the regular sunshine doesn’t stick around until May. To survive the cold and gray days, you’ll need a plan for fitness, like an indoor track or club membership, or the budget to snowbird south during our worst months.
- Car Dependency: Cities like Chicago or Minneapolis have strong transit systems, but the majority of the Midwest is built for drivers. Our suburban and rural areas are peaceful, but they’re tough to navigate without your own reliable vehicle.
- Aging Infrastructure: Many Midwest cities have rebounded from the Great Recession, but some smaller towns are still catching up on high-speed internet and modern amenities. They used to call this area the “Rust Belt” for a reason. If you’re looking to retire in a small town, just make sure the modern essentials (like reliable 5G or fiber) are in place before you purchase property.
Your Midwest Retirement Scouting Trip: 3 Things to Check
- 20-Minute Radius: Map the distance from your potential front door to the nearest highly rated hospital (like the ones listed above) and your favorite amenities.
- Local Tax Benefits: Visit the state’s website to understand how it taxes retirement income and the county or city’s website to see if they offer discounts on property taxes to save thousands as your home value rises.
- Hub Airport Proximity: If you plan to travel in retirement, check the drive time to a major hub like O’Hare, Detroit, St. Louis, or Minneapolis to avoid connection fatigue.
Final Thoughts: Is the Midwest Right for Your Retirement?
As we’ve discussed, our region offers world-class healthcare at some of the nation’s most competitive price points. We have a housing market that can unlock hundreds of thousands in equity, and a shifting tax landscape that usually favors the retiree.
If you’re looking for affordability, access to elite medical care, and a high-quality lifestyle, and you’re prepared to trade the ocean for the changing seasons, the Midwest could be a great place to spend your next stage of life.
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Frequently Asked Questions (FAQs)
Is retiring in the Midwest cheaper than Florida or Arizona?
Florida and Arizona are famous for having no state income tax, but those savings could be offset by rising homeowners’ insurance premiums or a more costly housing market. In Florida for example, insurance premiums average over $7,000 per year in 2026, the highest in the country according to Insurance.com. Combined with a Midwest median home price that is nearly $96,000 less than the national median, our region offers a stable financial foundation for many retirees.
What should I consider before retiring in the Midwest?
I think the most significant lifestyle adjustment for retiring in the Midwest is the duration of our cold and gray season. We have regular overcast skies from November through April combined with harsh cold winds. To stay active in retirement in the Midwest winters, you’ll need to plan a travel budget to snowbird in February or sign up for a membership at a nice indoor athletic club. If you can manage the cold, the benefit is access to a friendly community, affordable costs, reduced daily traffic, and less lifestyle stress.
Can you retire comfortably in the Midwest on $3,000 a month?
Comfort is subjective, but the Midwest helps a modest budget stretch further than the west coast or north east. If your mortgage is paid off or close to the mortgage average in cities like Dayton, OH, Fort Wayne, IN or Sioux Falls, SD, you might be able to make $3,000 work. But if your ideal retirement includes frequent travel and nights out on the town, you’ll want to take a hard look at your savings and retirement goals.
Do Midwest states tax pensions and retirement income?
Each state in the Midwest has different tax rules around your retirement income. For example, South Dakota offers a 0% income tax rate, while Iowa and Illinois basically ignore income taxes for most 401(k) and IRA distributions.
But a state with no or low income taxes might have a higher property tax bill. As shown in the property tax comparison chart earlier in this article, Illinois has a 0% tax on your pension but carries a 2.01% effective property tax rate, the highest in the region.
My rule of thumb? Be tax-efficient, but don’t be tax-obsessed. It’s smart to coordinate your withdrawals to save five figures over a decade, but try not to let taxes dictate where you choose to make a lifetime of memories.
About the Author
Joseph A. Eck, CFP®, is the owner and lead financial advisor at Stage Ready Financial Planning in Dayton, Ohio. Joseph helps retirement savers over 50 navigate the logistics of their ideal retirement ensuring their investments, taxes, and lifestyle goals are working in perfect harmony. By applying a disciplined, conductor-like approach to financial planning, he helps clients turn down the “noise” of the markets so they can focus on what truly matters. Joseph is a proud member of the Dayton community and is dedicated to providing down-to-earth, professional wealth management for Midwestern families.
Article References
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