Is there any wonder why so many people go to Florida or Arizona to retire? The beautiful weather, the friendly tax laws and easy laid back life styles.

But what about the worst states in the country to retire? Do you know what they are?


Worst of the worst

According to TopRetirements.com Illinois leads the ten worst states for retirement, followed by California, New York, Rhode Island, New Jersey, Ohio, Wisconsin, Massachusetts, Connecticut and Nevada.

John Brady, president of TopRetirements.com says states are rated on three factors: fiscal health, taxation, and climate. As for fiscal health, six of the 10 worst states for retirees are also among those identified by a Pew Center for States report as being in "fiscal peril."

They include California, Illinois, Nevada, New Jersey, Rhode Island and Wisconsin. Each shows some of the same pressures that have pushed California toward economic disaster.

Interestingly, two of the states on the Pew list are also where ten of the best cities to retire in are located, Arizona and Florida.

TopRetirements.com suggests that retirees may want to avoid states in fiscal peril because they could face decreasing services and increasing taxation.

Topping the website's list, Illinois's fiscal health could be the worst of any state. Brady points out that it even borrowed money to fund its pension obligations. As for California, although it does have a warm climate, it is expensive and its finances are in disarray.

New York wasn't mentioned as being in fiscal trouble by the Pew Center, but it does have very high taxes, including property taxes. In fact, Brady said New York has the second-highest tax burden and fifth-highest per capita property taxes. As if that wasn't enough, it's also very expensive to live in New York.

As for Rhode Island, Brady said it's probably the worst-off state in the Northeast from a financial viewpoint. It also has high taxes, though he noted that the state does boast some great places to live.

New Jersey has the highest property taxes in the U.S., as well as the highest total tax burden of any state. Plus, New Jersey has serious pension-funding issues. Brady says states with the greatest tax burdens after New Jersey were New York, Connecticut, Maryland, Hawaii, California, Ohio, Vermont, Wisconsin and Rhode Island, as well as the District of Columbia.

Ohio has high taxes and high unemployment (9.9 percent in October). Plus, it has cold winters. Of the 40 largest cities in the United States, Milwaukee has the coldest winter weather, based on normal daily temperatures, according to Current Results, a website that tracks weather trends. Cleveland is the fourth-coldest U.S. city.

Wisconsin is doubly cursed in the rankings as a high-tax state with cold weather. Plus, it has high property taxes. The only good news, at least for those to whom it applies, is that the Badger State doesn't tax military pensions.

Best of the best

In a related survey, USAA and Military.com announced this week that Waco, Texas, tops the first-ever "Best Places for Military Retirement" list. In its report, USAA and Military.com focused on U.S. communities that offer "a high quality of life and help maximize military retiree benefits as service members manage their 'first retirement' from the armed forces and begin planning their 'second retirement' from civilian life."

Other places on that list included, in order, Oklahoma City; Austin, Texas; College Station, Texas; Harrisburg, Pa.; San Angelo, Texas; Madison, Wis.; Pittsburgh; New Orleans; and Syracuse, N.Y.

Stretching your dollars


New England had two other states on the worst places for retirees: Massachusetts, which has high taxes including high property taxes and a very high cost of living, and Connecticut, which has the third-highest tax burden of any state as well as high property taxes.

States with the highest cost of living in the third quarter of 2010 were Hawaii, Alaska, California, New Jersey, New York, Connecticut, Rhode Island, Maryland, Vermont and New Hampshire, according to a Missouri Economic Research and Information Center analysis. The District of Columbia also makes the list.

Ironically, the 10th-worst place to retire is the one state where it's easy to find a cheap place to live, Nevada. But Nevada is presently the home-foreclosure capital of the world. In fact, it continues to lead the nation in terms of foreclosure filings per household. Although it is having financial problems, but the good news for retirees living there or contemplating a move there is that it doesn't have an income tax — at least not yet.

Still, Money-Rates.com, which examined such factors as crime rates, climate, longevity and economic conditions, including taxes, job opportunities and cost of living, found Nevada leading the list of worst states for retirees.

Picking your spot

Now, this doesn't necessarily mean you shouldn't retire to these poorly ranked states. Brady says everyone has to consider his or her own criteria for selecting the best or worst places to retire. To start your individual list, think about your most important criteria.

Brady focused mostly on fiscal health, taxation and climate but some other factors to consider are taxes, climate and topography; crime; fiscal health of the state; recreation; transportation; health care; cost of living, including housing; education, including college; cultural resources; susceptibility to natural disasters; proximity to friends and family; and fitting in socially, politically and religiously.

And of those, taxes might be the most important. Retirees are affected in different ways by taxes, he said. For instance, the taxation of pensions and Social Security might be better or worse in different states. Same for sales taxes.

Property taxes can vary widely, as well. For instance, Brady said, property tax can be one of the biggest bills for retirees and it's a category of taxation that's not progressive. You might not have any income, but you will still get taxed on the full value of your house, he said.

Some states do have programs to help seniors control their property taxes. Inheritance and estate taxes are also to be considered, though he said such taxes might be viewed as the tax tail wagging the state-of-residence dog.

Choosing the best state in which to retire depends on many individual factors, and for any two people, the 10-worst-states-for-retirees list might be a good list for one person, but not for the other.

Top cities

As for the best cities for retirement, Portfolio.com study lists Bradenton-Sarasota, Florida, Prescott and Lake Havasu City, Arizona, Cape Coral-Fort Myers, Naples, Palm Bay-Melbourne, Homosassa Springs, Ocala, Punta Gorda, and Port St. Lucie all in Florida.

The study used a six-part formula to rank 157 areas with at least 40,000 seniors. It named Bradenton-Sarasota, Florida as the number one choice for seniors' post-retirement plans.

Beginning next year, an unprecedented three million Americans will turn 65. While most of these seniors are expected to stay in their current homes, a significant number will decide to seek new places to live in other parts of the country.

J. Jennings Moss, editor of Portfolio.com says in addition to warm cities, we've also seen that seniors are attracted to communities that already have a significant population of retirees. This demonstrates that seniors will go to places that already have a comfortable infrastructure in place.