As a Naperville estate planning attorney, I often hear from clients considering a move to a “tax-friendly” state in retirement. While the idea of escaping Illinois income tax may be appealing, the real-world savings may be far less than expected. A recent Wall Street Journal article, “Retirees Who Move to Lower-Tax States May Not Save as Much as They Think” (April 9, 2025), highlights just how complex changing states for retirement can be.
The article tells the story of a couple who moved from Indiana to Florida to be closer to their adult children and take advantage of Florida’s no-income-tax status. What they didn’t expect were the sharply higher costs of home insurance, property taxes, and storm-related repairs—expenses that quickly canceled out their income tax savings. In fact, the husband ultimately returned to work to make ends meet.
More Than Just Income Tax
Many retirees overlook how states with no income tax often make up for it in other ways. For example:
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Sales Tax: Tennessee’s combined state and local sales tax rate is one of the highest in the nation at 9.56%.
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Property Tax: Texas has a property tax rate more than double Florida’s, and many retirees move into more expensive homes without realizing the true tax implications.
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Insurance Costs: Florida ranks second in the country for average home insurance premiums, often exceeding $5,000 per year—costs that can devastate a fixed income.
- Healthcare Quality and Access: The distribution of healthcare assets is not uniform across the United States. Some states and cities have easier access to better-quality care. This is obviously an especially important consideration as you age.
For Illinois residents considering retirement relocation, it’s also important to understand what you’re giving up. Illinois currently does not tax distributions from IRAs, 401(k)s, pensions, or Social Security—making it one of the more retirement-friendly states from an income tax perspective.
Estate Planning Considerations for Illinois Residents
When evaluating changing states for retirement, don’t overlook how estate and inheritance taxes could affect your legacy. Some states, such as Oregon and Massachusetts, tax estates valued above just $1 million. That’s far below the current federal exemption of nearly $14 million and below the Illinois exemption level of $4 million. If your estate exceeds these lower state thresholds, your heirs could face substantial tax burdens.
Strategic planning—including Roth IRA conversions, trust funding, and asset protection strategies—can help mitigate exposure in higher-cost states. More importantly, any move should be analyzed through the lens of your broader estate plan. The wrong move could not only increase your living expenses, but also complicate your asset distribution plans.
The Bottom Line for Naperville Retirees
Relocating for tax savings may seem like a sound financial move, but the full picture often reveals otherwise. Housing costs, insurance premiums, property taxes, and even estate taxes can offset or outweigh the benefits. If you’re a Naperville resident considering retirement out of state, talk with a qualified Naperville estate planning attorney before making a decision.
A personalized estate plan—one that considers state tax laws, long-term care risks, and intergenerational wealth transfer—can help you make the most of your retirement no matter where you live.
