The best places to retire in 2012

It?s time for our annual list of the Best Places to Retire. This year, we expanded the roster from 16 cities to 25, located in 18 states.

Reflecting what retirees say they want, there's a slightly bigger bias toward warmer climates in states like Florida, New Mexico and Arizona. Only about a half-dozen Best Places are located in what could be called chilly parts of the country. This group includes Bloomington, Ind., Fargo, N.D., and Pittsburgh.

But the bigger bias is the importance we place on day-to-day economic issues: the average price of a home, the cost of living and the tax burden on retirees. So there are no entries here from states where it costs a lot to get by, such as California, Connecticut, New Jersey and New York.

Forbes.com slideshow: See the 25 best places to retire in 2012

(The June 25 print issue of Forbes Magazine contains a two-page map pinpointing the places.)

We reviewed data for hundreds of cities in all 50 states, plus the District of Columbia. Besides the usual financial factors, we looked at weather, availability of doctors, serious crime rates and encouragement for an active retirement. To do this, we considered evaluations by Bicycling Magazine and volunteeringinamerica.org.

More and more retirees are working, at least initially. So we also took into account both unemployment rates and rankings of job and economic growth compiled by the Milken Institute.

Nationwide, the average price of an existing single-family house is $163,500, according to the National Association of Realtors. Only four cities on our list have median prices above that, and none really by all that much. The priciest, at $198,000, is Asheville, N.C. At the other end, the average price of a home in Atlanta is only $91,000, followed by Cape Coral, Fla. at $116,000 and Boise, Idaho, at $118,000.

In some ways the tax issue is the trickiest to evaluate. A low tax burden might mean a lower level of services for retirees to tap. Nine states do not have a state income tax, which is generally the biggest levy of them all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming. But before you race to any of them, remember that such states tend to have other taxes that are higher. For example, in Seattle, the largest city in income-tax-free Washington State, the sales tax is a whopping 9.5 percent. That?s the highest among major U.S. cities (and tied with Chicago). Also in these jurisdictions property taxes often are on the high aside as a percent of fair market value. The bills of government have to be paid somehow.

However, many states afford tax breaks to retirees, such as light or no taxation on Social Security and pension benefits. In our view, the best states for retirees from a tax perspective are Alabama, Alaska, Arizona, Georgia, Idaho, Kentucky, Louisiana, Mississippi, Montana, New Hampshire, New Mexico, Nevada, Oklahoma, South Carolina, South Dakota, Utah and West Virginia. The map in the June 25 issue of Forbes is color-coded for tax burden.

We haven?t tried to take into account intangible factors like scenic beauty (although there are a number of very agreeable settings on the list, including Salt Lake City, Asheville, N.C. and Lynchburg, Va.). And it?s impossible to factor in individual family issues. The appeal of staying near children, other relatives and friends easily could easily outweigh the many factors we used to pick our best places.

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? 2012 Forbes.com

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