5 States That Don’t Tax Social Security Or Pensions

2. Alabama

Cost of Living Index:88.1

While Alabama is tax-friendly since it has no taxes on social security retirement benefits, it does fully tax withdrawals made from retirement accounts. Homeowners who are 65 and older are also exempt from paying property taxes. However, the state does levy sales tax ranging from 4%-11%. On average, the cost of living in Alabama is $39,657 per year.