With its proximity to nature, affordable housing costs, and below-average income tax, Hot Springs, Arkansas earns its place on Investopedia and Southern Living’s list of the most affordable southern places to retire. In fact, it was the number one choice based on our team’s research, which gauged several affordability factors and overall lifestyle. 

While it’s an under-the-radar town, Hot Springs is definitely worth exploring if you’re looking for a place to settle in retirement. One of the big reasons: Hot Springs is an affordable place to live. According to its Chamber of Commerce, the Hot Springs’ cost of living overall is 14.82% lower than the national average. What’s more, our research found that it has one of the lowest median housing costs in the South.

Below-Average Cost of Living

From an affordability standpoint, one of the key pieces of data that makes Hot Springs stand out is its median housing costs. Hot Springs residents have a median cost of $810 per month, which is 30% less than the $1,163 median across the South. 

If you’re a new homebuyer, the median home sale price in Hot Springs was $340,000 as of October 2024. Renters can find affordable options as well, with some listings as low as $500, making it attractive for both renters and buyers who may be relocating from areas with higher costs of living.

Why This Is Key To an Affordable Retirement

Living on a fixed income in retirement means that there is a finite amount of money that you have to rely on—and it has to last your lifetime. Choosing to live in an area that has a lower cost of living can help you stretch out your limited resources. It can also allow you to allocate more of your budget toward the enjoyable activities that you’ve been looking forward to once you stopped working.

Housing costs do tend to play the biggest role in the cost of living. The Center for Retirement Research at Boston College reports that it typically comprises around 40% of most household budgets. Hence why if you choose to live in an area with lower housing costs, like Hot Springs, it can provide more flexibility in your budget and lifestyle.

No State Property Taxes

Not only are the housing costs themselves lower, but the State of Arkansas does not have a property tax. Residents should still expect to pay county property taxes, which average about $859 per year, based on the median home sale price.

Statewide, Arkansas’ average $776 per capita property tax is the third lowest per capita in the nation, just under Alabama ($598) and Oklahoma ($771). Compared to the $1,675 national average for state and local property tax per capita nationwide, Hot Springs property owners are getting a bargain.

Why This Is Key To an Affordable Retirement

Anytime a recurring bill like property taxes is lower than average, it allows your money to go farther in retirement. This is why people who live in high property tax areas like the Northeast or the West Coast during their working years often migrate south once they approach retirement.  

Below-Average Income Tax

When you have a fixed income, such as a pension, the last thing you want is for a large chunk of it to go toward income taxes. Arkansas is one of 29 states that has a graduated state individual income tax, with rates ranging from 2.00% to 4.40%. Even if you earn enough to have to pay the top rate, it’s still lower than many states. For contrast, the top rate is 13.3% in California.

Of course, there are a few states for which there is no income tax at all or have slightly lower rates, but Arkansas is still on the lower end.

Why This Is Key to an Affordable Retirement

You may hear people discuss trying to retire to a “tax-friendly” or “pension-friendly” state, and what they’re really talking about is income tax. As mentioned, Arkansas isn’t necessarily the best in this regard because it does charge an income tax, but it is on the lower side compared to some locations.

It may not be the only factor you look at when you’re crunching the numbers of your retirement budget, but as part of your overall analysis, income tax should be something you consider.

Other Surprising Perks of Hot Springs, Arkansas for Retirees

Hot Springs is affectionately known as “Spa City” because of its therapeutic thermal waters and springs and spa offerings. Because of its beauty and thermal hot springs, Hot Springs National Park was also the first federally protected area in the nation, designated back in 1832. For retirees with active lifestyles, it’s wonderful to have “The American Spa” so close to home.

Whether you enjoy biking, fishing, golfing, or hiking, there is plenty to do outdoors to keep you active and social. Hot Springs also hosts numerous music and film festivals.

Bottom Line

Hot Springs, Arkansas may not come immediately to mind when you think about retirement destinations, but it has many of the key features that retirees look for. First and foremost, it is very affordable thanks to its below-average housing costs, lack of state property taxes, and lower-than-average state income taxes.

But beyond the cost savings, the Spa City lives up to its name with its natural hot springs. Add to that its mild climate, lakes for fishing and boating, excellent hospitals, and beautiful scenery, and you can see why it might be the ideal place to live out your golden years. 

Methodology

The places chosen for the 2024 South’s Best Places to Retire list were selected from all Census Designated Places in southern states (Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia). Median household income and monthly housing cost estimates were collected from the 2022 American Community Survey (5-year) for each place in the South. Places for which estimates included large margins of error were removed from the initial list. 

The final list of places was selected by evaluating: 

1.  Housing affordability relative to the South (how each place’s monthly housing costs compare with a weighted average for states in the South);
2.  Median income in each place (as a proxy for taxes collected, which may be related to community resources; and
3.  Individual reporting on proximity to parks or coastlines, recent changes in the community, and previous reporting by Southern Living highlighting the best places to retire.