Texas Retirement Cost Guide: What You Really Need to Know About Retiring in the Lone Star State

For many Americans, Texas seems like an ideal place to retire. The warm climate, vibrant cities, welcoming small towns, and lack of a state income tax make it an attractive destination.

But retiring in Texas isn’t automatically inexpensive. Property taxes, healthcare expenses, and even lifestyle costs can surprise retirees who assume their budget will automatically stretch further simply because they’ve crossed the state line.

If you’re planning to retire in Texas, or you already live here and are preparing for your next chapter, understanding what retirement truly costs is essential. This guide was designed as a resource you can save and return to throughout your planning journey. We’ll cover housing costs, healthcare considerations, daily living expenses, hidden financial surprises, and how to integrate all these factors into a comprehensive retirement plan.

Housing Costs: Why “No Mortgage” Doesn’t Always Mean “Low Cost”

For most people, housing remains one of the largest expenses in retirement.

Cost of Homes

Housing costs are a key consideration, especially if you’re looking for smaller, easier-to-manage homes.

In major cities like Austin, 1-bedroom homes average around $400,000, while 2-bedroom homes can reach $500,000. Houston offers more affordable options, with 1-bedroom homes near $300,000 and 2-bedroom homes around $350,000.

If you’re looking for even more budget-friendly options, San Antonio and El Paso are worth considering. In San Antonio, 1-bedroom homes average $250,000, and 2-bedroom homes around $300,000. In El Paso, 1-bedroom homes are about $200,000, with 2-bedroom homes at $250,000.

Smaller cities like McAllen and Killeen offer some of the most affordable options for retirees. Here, 1-bedroom homes start around $180,000–$230,000, and 2-bedroom homes range from $230,000–$280,000.

Choosing the right city and home size can make a significant difference in your retirement budget and long-term financial comfort.

Property Taxes

Even if you’re already living here and your home is paid off, you’re not done paying for it. Texas doesn’t levy a state income tax, which is often touted as a major financial advantage, but the trade-off is that property taxes are some of the highest in the country.

Depending on where you live, these taxes typically range from about 1.5% to 2.5% of your home’s value annually. That means a retiree living in a $400,000 home could easily owe $6,000 to $10,000 each year just in property taxes, and that bill tends to increase over time as home values rise.

These variations matter because even within a state without income tax, where you live significantly influences your housing-related costs. A retiree in El Paso will likely pay more than five times the property-tax rate per $100 of assessed value than someone in Houston or Plano. For retirees building their housing cost projections, and ultimately their Retirement Success Plan, these regional differences are vital.

Insurance

In addition to taxes, you’ll need to budget for homeowners’ insurance, which can be more expensive in Texas due to weather risks. Whether you live in the Hill Country, the Houston metro area, or near the Gulf Coast, storms, hail, and hurricanes can drive premiums higher than expected.

Retirees also need to consider ongoing maintenance costs. Even a well-built home will require regular upkeep, roof repairs, appliance replacements, landscaping, and other expenses that can easily add up to 1% or 2% of the home’s value every year.

Some retirees find that downsizing into a smaller home or relocating to a different county with lower property tax rates can provide meaningful savings. Others explore active adult communities that offer lower maintenance living in exchange for monthly HOA fees. The key is to run long-term projections rather than assume housing costs will decline just because your mortgage is gone.

Healthcare and Long-Term Care: The Costs Few Retirees See Coming

If there’s one expense that consistently surprises retirees, it’s healthcare. Even healthy individuals can face steep costs as they age, and in Texas these expenses can be significant.

Medicare Considerations

Medicare Part B premiums, which cover doctor visits and outpatient care, are expected to average around $180 per month per person in 2025. While that may sound manageable, higher-income retirees are subject to IRMAA surcharges, meaning your premiums could be hundreds of dollars more per month if your income crosses certain thresholds.

Beyond basic Medicare, retirees must choose between Medicare Advantage plans, which typically have lower monthly costs but narrower provider networks, and Medigap policies, which cost more up front but can reduce unpredictable out-of-pocket bills. This decision can have a major impact on your healthcare budget, so it’s important to evaluate your health, your preferred doctors, and your long-term plans carefully.

Here’s a quick breakdown of estimates for Texas:

• Medicare Part B Premiums: Around $185/month, with potential IRMAA surcharges adding an extra $74–$443.90/month for higher-income retirees according to NerdWallet.
• Medigap (Supplemental Insurance): The average monthly premium in Texas is $151.17, with ranges varying by plan type and individual factors according to MedicareSupplement.com and Texas Insurance Information Portal.
• Out-of-Pocket Drug Expenses: It’s prudent to plan for up to $2,000 annually, plus about $600 in premiums for prescription drug coverage naifa.org.

Long Term Care

The largest wild card in retirement health expenses is long-term care. Nursing homes, assisted living facilities, and in-home care are rarely covered by Medicare and can cost tens of thousands of dollars per year. In Texas, the average cost of nursing home care ranges from $75,000 to $95,000 annually, and assisted living can run $3,000 to $5,500 per month. A single extended illness or injury can dramatically reduce your retirement savings if you’re not prepared.

Planning ahead is crucial. Some retirees explore long-term care insurance or hybrid policies that combine life insurance with long-term care benefits. Others choose to self-fund this risk by building tax-efficient income streams, such as Roth IRA conversions, that provide flexibility when paying for care. Addressing these costs early before you need care can save you and your loved ones from financial stress down the road.

Everyday Living Expenses: Inflation Is the Quiet Threat

One of the biggest myths about Texas is that everything is inexpensive. While it’s true that the state’s overall cost of living is lower than in places like California or New York, retirees still need to budget carefully for day-to-day expenses, particularly in fast-growing cities where prices are rising.

Groceries, gas, dining out, and entertainment tend to cost about the same as the national average in major metro areas such as Houston, Dallas, and Austin. Rural towns may be cheaper, but retirees who relocate to small communities often face longer drives to shopping, medical care, and family, which increases transportation costs. Texas is a car-dependent state, and vehicle expenses including gas, insurance, and maintenance can easily add up to $4,000 to $6,000 a year.

Utility costs are another factor many people overlook. Summers are long and hot, and running the air conditioner around the clock can result in electricity bills ranging from $150 to $300 per month or more depending on home size and energy efficiency. These costs may not seem overwhelming at first, but when combined with inflation over 20 to 30 years of retirement, they can take a significant bite out of your savings.

A well-built retirement plan accounts for inflation by creating income streams that grow over time. Relying solely on fixed pensions or Social Security may leave you vulnerable as prices rise. Building flexibility into your plan ensures you maintain your lifestyle without overspending your savings.

The Hidden Costs That Catch Retirees Off Guard

Even after carefully projecting housing, healthcare, and everyday expenses, many retirees are caught off guard by costs they never expected. Some are financial, while others are emotional decisions with financial consequences.

Federal taxes on Social Security and retirement account withdrawals are often overlooked by people moving to Texas for its lack of state income tax. While you won’t owe Texas income tax, you will still owe federal taxes on distributions from traditional IRAs, 401(k)s, or pensions. Retirees with significant income may also face Medicare premium surcharges or taxes on up to 85% of their Social Security benefits.

Other surprises include helping adult children or grandchildren financially, making home modifications to age in place, or paying for travel to visit far-away family. Many retirees also underestimate how much they’ll spend on bucket-list vacations during the “Go-Go Years” of retirement when they are healthiest and most active. If these costs aren’t planned for, they can derail even a well-structured budget.

A smart strategy is to create a dedicated contingency fund inside your broader retirement plan. Setting aside $20,000 to $30,000 or more, depending on your circumstances for unexpected expenses provides peace of mind. This isn’t money you expect to spend every year, but it’s there to prevent financial surprises from forcing you to dip into your long-term investment portfolio at the wrong time. This is exactly what we help you do in Step 2 of our Retirement Success Plan, which is Income Planning.

From Cost Projections to a Real Retirement Plan

Knowing what retirement costs in Texas is only the first step. The real work lies in creating a plan that integrates these expenses with your income sources, investment strategy, and tax planning. This is where many retirees fall short, and where a comprehensive approach like Oak Harvest Financial Group’s Retirement Success Plan can make all the difference.

Rather than simply managing investments or picking stocks, we help you build a plan around your life, your goals, and your specific financial situation. The Retirement Success Plan coordinates your Social Security strategy, pension benefits, and portfolio withdrawals to create reliable income that grows over time.

It includes tax-smart strategies, such as Roth IRA conversions, to help minimize your future tax burden and avoid costly Medicare surcharges. It incorporates healthcare and long-term care planning to ensure that your assets are protected even if you face significant medical expenses later in life. And it aligns your investment portfolio with your income needs and risk tolerance so you can enjoy retirement without worrying about market volatility derailing your plans.

When you see all of these moving parts working together: housing, healthcare, inflation, taxes, investments, estate planning… it becomes clear that retirement success is about much more than simply “having enough.” It’s about structuring your money so that it supports your ideal lifestyle while giving you confidence that no financial surprise can throw you off course.

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The Bottom Line: Retiring in Texas Is a Smart Move When You Plan Ahead

Texas can be a fantastic place to retire. Its growing economy, diverse communities, and favorable tax environment make it attractive to thousands of retirees every year. But the absence of state income tax doesn’t mean the cost of living is automatically low, and overlooking property taxes, healthcare costs, and long-term care can lead to financial stress.

By projecting your real expenses, preparing for inflation, and building a retirement income plan that accounts for both expected and unexpected costs, you can retire with confidence. If you’re considering staying in Texas for your golden years or relocating here, now is the time to take a holistic approach to your future.

At Oak Harvest Financial Group, we help evaluate your current retirement strategy, or build a personalized plan designed to fit the true cost of retiring in Texas. Our holistic approach goes beyond investments to address income planning, taxes, healthcare, long-term care, and more so you can retire with confidence, not uncertainty.

If you’re ready to take the next step with a team committed to putting your best interests first, schedule a conversation with us today.

 

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