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10/20/2015 10:03 am ET Updated Oct 23, 2015

The 10 Best States To Enjoy An Early Retirement

Early retirement may seem like an impossible dream for many -- but it doesn't have to be. Early retirees can begin collecting Social Security benefits as early as at age 62, but doing this can reduce your benefits throughout retirement. 

But younger retirees can save on retirement costs by choosing a state with favorable tax laws, low housing costs and an affordable cost of living. SmartAsset, a personal finance advice website, today released its list of the best states for early retirement. The list looked at six factors using data from the U.S. Census Bureau, Kaiser Family Foundation and the Council for Community and Economic Research. These factors included taxes (income, sales and property), median annual housing costs, the cost of living (non-housing) and the cost of health insurance coverage. 

Check out the top 10 states below and head over to SmartAsset to learn more about the rankings and methodology. 

  • Kentucky
    Kentucky takes the top spot with its low cost of living and tax breaks for retirees. According to <a href="https://smartasset
    Henryk Sadura via Getty Images
    Kentucky takes the top spot with its low cost of living and tax breaks for retirees. According to SmartAsset, retirees can claim deductions on about the first $41,000 of their retirement income, from sources like their IRA and 401(k). The Bluegrass State will also appeal to nature lovers, offering plenty of fishing, boating and hunting opportunities.
  • South Dakota
    You'll have to brace yourself for chilly winters, but South Dakota offers beautiful national parks and monuments -- and, of c
    Fotosearch
    You'll have to brace yourself for chilly winters, but South Dakota offers beautiful national parks and monuments -- and, of course, Mount Rushmore. It also offers some of the lowest housing costs in the nation.
  • Wyoming
    Another win for nature lovers, Wyoming is home to the beautiful Yellowstone National Park. But besides the breathtaking scene
    Ed Freeman via Getty Images
    Another win for nature lovers, Wyoming is home to the beautiful Yellowstone National Park. But besides the breathtaking scenery, early retirees can benefit from having no state personal income taxes and a low sales tax.
  • Tennessee
    Music lovers will want to flock to Tennessee for its rich&nbsp;music scene. Here, retirees can also benefit from no state per
    shutterstock
    Music lovers will want to flock to Tennessee for its rich music scene. Here, retirees can also benefit from no state personal income tax and an affordable cost of living -- but beware that the sales tax is high.
  • Mississippi
    The cost of living in this Southern state will help retirees save, falling 15 percent below the national average, according t
    gnagel via Getty Images
    The cost of living in this Southern state will help retirees save, falling 15 percent below the national average, according to SmartAsset. Retirement income is also safe from state and local taxes here. The state prides itself on its culinary delights and history.
  • New Mexico
    Retirees headed to this Southwestern state will benefit from the low cost of insurance. SmartAsset says that for the average
    Joel Bennett via Getty Images
    Retirees headed to this Southwestern state will benefit from the low cost of insurance. SmartAsset says that for the average 60-year-old, the cost of purchasing silver-level health insurance coverage is the third lowest in the nation.
  • Pennsylvania
    Sports fans will have plenty to keep them occupied&nbsp;in this state rich with pro and college sports teams. Retirement inco
    shutterstock
    Sports fans will have plenty to keep them occupied in this state rich with pro and college sports teams. Retirement income is tax-exempt here, as are pensions for people over 59.5 years old.
  • Montana
    The tranquil Northwestern state is sales tax free and has some of the lowest housing costs in the nation. Retirement income t
    Ed Reschke via Getty Images
    The tranquil Northwestern state is sales tax free and has some of the lowest housing costs in the nation. Retirement income taxes are also fairly low.
  • Florida
    Who doesn't consider Florida a retirement dream? The Sunshine State doesn't have a state income tax, but due to its popularit
    Lonely Planet via Getty Images
    Who doesn't consider Florida a retirement dream? The Sunshine State doesn't have a state income tax, but due to its popularity, you'll have to shop around in different cities to find affordable housing.
  • Texas
    Retirees have a number of options when it comes to settling in the Lone Star State. Texas has numerous large, vibrant cities,
    Walter Bibikow via Getty Images
    Retirees have a number of options when it comes to settling in the Lone Star State. Texas has numerous large, vibrant cities, including Austin, Houston, San Antonio and Dallas. The cost of living here is relatively low, but property taxes run high, according to SmartAsset.

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