Affordability is a key factor in deciding your ultimate retirement destination. After all, you need to make sure your living costs don't put too big a strain on your fixed income. Indeed, 67% of people say they'd move to a less expensive location to have a more financially comfortable retirement, according to a survey by Merrill Lynch and Age Wave, a research firm focused on the aging population. To that end, we identified which states are the cheapest in the nation, offering below-average living costs.

Of course, being cheap is sometimes just as bad as it sounds, and affordable living costs don't always guarantee a friendly financial environment. We ranked all 50 states for retirement based on several financial data points, including cost of living, as well as the tax treatment of resident retirees and the fiscal health of the state. These 10 states are among the best and most affordable for retirees.

Pennsylvania

Overall retirement ranking: #14

Population: 12.8 million

Share of population 65+: 16.7%

Cost of living: 3% below U.S. average

Average income for 65+ households: $48,706

Average health care costs for a retired couple: Below average at $411,414

Tax rating for retirees: Most Tax Friendly

The Keystone State locks in an affordable standard of living for retirees. Health care costs for a 65-year-old retired couple come in 2.9% below the national average. And the tax situation, among the 10 friendliest in the U.S. for retirees, can boost your bottom line even more: Most retirement income, including Social Security benefits, is not taxed. Unfortunately, Pennsylvania's own budget is not so sturdy. With not enough cash to cover short- or long-term obligations, its fiscal health ranks a low 45th among all 50 states, according to rankings from the Mercatus Center at the George Mason University.

South Dakota

Overall retirement ranking: #1

Population: 851,058

Share of population 65+: 15.2%

Cost of living: 4% below the U.S. average

Average income for 65+ households: $43,712

Average health care costs for a retired couple: Below average at $415,297

Tax rating for retirees: Most Tax Friendly

The Mount Rushmore State might not be the first place that comes to mind when you dream of where to retire, but it's first place in our overall ranking of all 50 states for retirement. Affordability is the main factor pushing it to the top spot. In addition to low living expenses, including for health care, South Dakota is one the 10 Best States for Taxes on Retirees. And you can be confident it'll stay that way. The state ranks third in the country for fiscal soundness, according to a recent report from George Mason University's Mercatus Center, which indicates high confidence that it can keep up with short-term expenses and long-term financial obligations.

Idaho

Overall retirement ranking: #11

Population: 1.6 million

Share of population 65+: 14.3%

Cost of living: 5% below the U.S. average

Average income for 65+ households: $40,248

Average health care costs for a retired couple: Below average at $407,942

Tax rating for retirees: Mixed

Put your potato jokes away, people. Idaho has some serious advantages to offer your retirement. The state's affordability, for one thing, makes it easy to stretch your retirement savings. And while the tax picture for retirees is mixed--there's a statewide sales tax of 6% and a state income tax that can go as high as 7.4%--Social Security benefits are not subject to state taxes. Idaho also is one of the states that doesn't have an inheritance or estate tax.

South Carolina

Overall retirement ranking: #12

Population: 4.8 million

Share of population 65+: 15.8%

Cost of living: 7% below the U.S. average

Average income for 65+ households: $43,340

Average health care costs for a retired couple: Below average at $408,343

Tax rating for retirees: Tax Friendly

If the mild weather and southern charm of the Palmetto State aren't enough of a retirement draw, surely the affordability can tempt you. On top of below-average living costs, the tax situation goes easy on a fixed income, too. South Carolina doesn't tax Social Security benefits and offers generous exemptions on other types of retirement income. It also does not levy an inheritance or estate tax. Property taxes tend to be very low.

Georgia

Overall retirement ranking: #3

Population: 10.1 million

Share of population 65+: 12.3%

Cost of living: 7% below the U.S. average

Average income for 65+ households: $50,607

Average health care costs for a retired couple: Below average at $404,460

Tax rating for retirees: Most Tax Friendly

Warm weather and low living costs make Georgia just peachy for a happy retirement destination. Health care expenses are particularly affordable for retirees, with the sixth lowest average costs for a retired couple in the country. Plus, Georgia's favorable tax situation makes it one of the 10 Best States for Taxes on Retirees.

Missouri

Overall retirement ranking: #20

Population: 6.1 million

Share of population 65+: 15.4%

Cost of living: 10% below U.S. average

Average income for 65+ households: $43,540

Average health care costs for a retired couple: Below average at $408,746

Tax rating for retirees: Mixed

The Show Me State has little to tell in the way of retirement advantages other than a cheap cost of living--and even that comes with a caveat. The low living expenses go hand in hand with relatively low household incomes. And the tax situation is moderate: If your adjusted gross income is less than $85,000 for single filers ($100,000 for couples filing jointly), your Social Security benefits are not taxed and you can deduct a portion of your public retirement benefits. But distributions from individual retirement accounts, 401(k)s and other employer retirement plans are taxable at ordinary income tax levels, which hits the top rate of 6% on more than just $9,000 of taxable income.

And one notable downside: Missouri ranks low at 42nd in the nation for senior health with a high percentage of low-care nursing home residents and a high prevalence of smoking, according to the United Health Foundation.

Ohio

Overall retirement ranking: #19

Population: 11.6 million

Share of population 65+: 15.5%

Cost of living: 12% below U.S. average

Average income for 65+ households: $42,667

Average health care costs for a retired couple: Below average at $417,912

Tax rating for retirees: Mixed

Ohio's status as a destination for retirees matches its geographic location: in the middle. Its living costs are well below average, but so is its average household income. Even the tax situation is just fine: Social Security benefits are not taxed, and retirees living in the Buckeye State can claim a tax credit of up to $200 on other retirement income.

Iowa

Overall retirement ranking: #13

Population: 3.1 million

Share of population 65+: 15.8%

Cost of living: 12% below U.S. average

Average income for 65+ households: $41,194

Average health care costs for a retired couple: Below average at $399,991

Tax rating for retirees: Not Tax Friendly

Low living costs are the big advantage for retirees in the Hawkeye State. Health care costs are especially affordable, at 5.6% below the U.S. average, based on what a 65-year-old retired couple can expect to pay for the rest of their lives. That should help the below-average household income for seniors stretch further. But the tax situation may be burdensome: While Social Security benefits are untaxed, some retirement income may get hit by the high top rate of 8.98%. On the plus side, people age 55 or older can exclude up to $6,000 if single ($12,000 for joint filers) of taxable retirement income.

Tennessee

Overall retirement ranking: #5

Population: 6.5 million

Share of population 65+: 15.0%

Cost of living: 12% below the U.S. average

Average income for 65+ households: $47,891

Average health care costs for a retired couple: Below average at $411,617

Tax rating for retirees: Tax Friendly

The Volunteer State is a good choice for budget-conscious retirees. According to data from the Council for Community and Economic Research, every major metro area offers below-average living costs in almost every category of expenses, including health care--among the biggest financial concerns for aging Americans. Plus, Tennessee does not levy state income taxes, so your retirement income can stretch even further. And being economically healthy, Tennessee should have no issues maintaining its tax-friendliness; it ranks eighth of all states for fiscal soundness, according to a recent report from the Mercatus Center.

Alabama

Overall retirement ranking: #6

Population: 4.8 million

Share of population 65+: 15.3%

Cost of living: 13% below the U.S. average

Average income for 65+ households: $44,934

Average health care costs for a retired couple: Below average at $404,922

Tax rating for retirees: Tax Friendly

Frugal retirees are sure to love the Heart of Dixie. You can get many of Florida's retirement attractions--warm weather, nice beaches and plenty of golf--all at a lower price. The low living costs extend to health care, for which retirees can expect to spend 4.4% less than the average retired American couple. Taxes are easy on the budget, too, with income tax rates ranging from just 2% to 5%, and Social Security benefits being exempt.

How We Ranked Every State for Retirement

To rank all 50 states for retirement, we weighed a number of factors:

• Taxes on retirees, based on Kiplinger's Retiree Tax Map, which divides states into five categories: Most Tax Friendly, Tax Friendly, Mixed, Not Tax Friendly and Least Tax Friendly.
• Cost-of-living for each state, with data provided by Sperling's Best Places, includes overall costs--across all age groups--for housing, food and groceries, transportation, utilities, health care and miscellaneous expenses.
• Average health care costs in retirement are from HealthView Services and include Medicare, supplemental insurance, dental insurance and out-of-pocket costs for a 65-year-old couple who are both retired and are expected to live to 87 (husband) and 89 (wife).
• Rankings of each state's economic health are provided by the Mercatus Center at George Mason University and are based on various factors including state governments' revenue sources, debts, budgets and abilities to fund pensions, health-care benefits and other services.
• Rankings of the health of each state's population of residents 65 and over are from the United Health Foundation and are based on 34 factors ranging from residents' bad habits (smoking and excessive drinking) to the quality of hospital and nursing home care available in the state.
• Household incomes and poverty rates are from the U.S. Census Bureau.
• Population data, including the percentage of the population that is age 65 and older, is also provided by the Census Bureau. They are highlighted in these rankings for the benefit of readers, but were not factors in our methodology for ranking the states.

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Stacy Rapacon is an editor at Kiplinger.