Study after study supports what many Americans already know: A lot of us are financially unprepared for retirement. One study from Bankrate.com, for example, shows that 26% of U.S. residents between the age of 50 and 64 don't have anything saved for retirement. And, according to the Transamerica Center for Retirement Studies, 36% of baby boomers plan to rely solely on Social Security as their primary of income – worrisome, considering that Social Security benefits are intended to replace only about 40% of the average worker's salary.

Obviously, many Americans are seeking ways to make what money they have last longer. One option is to retire abroad, where it's possible to find a lower cost of living and affordable healthcare – not to mention, often, a nicer climate (see Retirement Funds Too Little? Retire Abroad). But if international travel isn't how you see your future, it may be possible to settle down in a less expensive corner of the United States, where lower costs of living and gentler local taxes mean you can retire on less.

To find these money-saving states, we analyzed data from Bankrate.com's Best and Worst States to Retire list. We looked at the top 20 least expensive states in two categories – cost of living and taxes (both income and sales taxes) – and found six states that ranked high in both categories, making them today's least expensive states for retirement.

Cost of Living Rank: 12
Tax Rate Rank: 10
State Income Tax: 2% to 5%
State Sales Tax: 4%

Alabama ranks 12^th lowest in cost of living and 10^th for taxes. Its 2011 tax burden was 8.3% – the 10^th lowest in the country – and taxpayers spend $2,886 per capita in state and local taxes. State income taxes range from 2% to 5%, but most retirement income, including Social Security, military, civil-service, state/local government and qualified private pensions, is exempt. Out-of-state government pensions are exempt as long as they are defined-benefit plans. Homeowners aged 65+ don't pay any state property taxes. Cities and counties can still apply levies, but homeowners age 65+ with a taxable income of $12,000 or less qualify for an exemption.

Cost of Living Rank: 1 (lowest)
Tax Rate Rank: 11
State Income Tax: 3% to 5%
State Sales Tax: 7%

Mississippi earns the top spot for the lowest cost of living in the nation. Its 2011 tax burden of 8.4% ranks 11^th lowest, and taxpayers pay $2,620 per capita in state and local taxes. Property tax collections are $870 per capita – the 10^th lowest in the nation – and homeowners aged 65+ are exempt from the first $75,000 of their property's value. Social Security benefits, Railroad Retirement benefits and qualified retirement plan income (including income from IRAs, 401(k)s, 403(b)s, Keoghs, and qualified public and private pension plans) are exempt.

Cost of Living Rank: 13
Tax Rate Rank: 14
State Income Tax: 1.7% to 4.9%
State Sales Tax: 5.125%

New Mexico ranks 13^th lowest in cost of living and 14^th for taxes. The 2011 tax burden of 8.6% ranks 14^th lowest out of 50 states, and taxpayers spend $3,044 per capita on state and local taxes. Social Security benefits are taxed, but the income can be included as part of an overall retirement income exemption of up to $8,000 (some restrictions apply). Low-income comprehensive tax rebates are available to those age 65+ with a modified adjusted gross income of $22,000 or less. If someone age 65+ has at least $28,000 in out-of-pocket medical expenses, he or she can claim a $2,800 tax credit, plus exempt up to $3,000 in income from state income taxes. Property tax collections are $685 per capita, and rebates are available to those 65+ who earn $16,000 or less.

Cost of Living Rank: 4
Tax Rate Rank: 12
State Income Tax: 0.5-5.25%
State Sales Tax: 4.5%

Oklahoma ranks 4^th lowest in cost of living, behind Idaho, Tennessee and Mississippi. The state's 2011 tax burden of 8.5% ranks 12^th lowest in the nation, and taxpayers spend $3,187 per capita in state and local taxes. Property tax collections amount to $603 per capita, the 2^nd lowest nationwide. Social Security and Civil Service Retirement System benefits are not taxed, and residents can exclude up to $10,000 per person (or $20,000 per couple) of other types of retirement income. Property tax collections are $603 per capita – the 2^nd lowest in the country – and seniors who meet income requirements are eligible for both tax refunds and valuation freezes that keep their taxes the same, even if their home (or the neighborhood) appreciates in value.

Cost of Living Rank: 2
Tax Rate Rank: 6
State Income Tax: None (on earned income; dividends and interest are taxed at 6%)
State Sales Tax: 5%-7%

Tennessee residents enjoy the 2^nd lowest cost of living in the U.S., behind only Mississippi (see below). The state's 7.6% tax burden for 2011 (the most recent data available from The Tax Foundation, an independent tax policy research organization) ranks 6^th lowest out of all 50 states and is well below the national average of 9.8%. Taxpayers pay $2,777 per capita in state and local taxes (compare that to $6,622 in New York, ranked dead worst for taxes in the "Best and Worst States" list), and property tax collections are $799 per capita, the 9^th lowest nationally. Starting in January 2016, Tennessee will no longer impose an inheritance tax.

Cost of Living Rank: 14
Tax Rate Rank: 4
State Income Tax: None
State Sales Tax: 6.25%

Texas ranks 14^th in the nation in cost of living, and 4^th in taxes. There is no state income tax, so Social Security benefits and other retirement income avoid taxation, at least at the state level. The 2011 tax burden was 7.5%, which ranks 4^th lowest in the country, and taxpayers pay $3,088 per capita in state and local taxes. State and local property taxes are relatively high, and collections are about $1,559 per capita (the 14^th highest in the nation). Homeowners who are 65 or older, however, benefit from two homestead exemptions that keep up to $25,000 of the home's assessed value from taxes.

Of course, retirement destination decisions shouldn't be totally dictated by finances: It's important to consider factors such as your recreational interests, hobbies, comfort and proximity to family and friends. Still, retiring in a state that has a low cost of living and favorable taxes can be a good move if you're trying to stretch your retirement dollars.

It can also be a smart move if you have wealth that you are trying to safeguard for yourself or for future generations, and some states have pushed for tax changes intended to entice retirees. None of the states listed above impose estate or inheritance taxes, except for Tennessee (which is currently phasing them out); in fact, the state's decision to repeal its inheritance tax was largely done to keep its wealthy residents in state – and to attract others from out of state.

For more thoughts, see Finding A Retirement-Friendly State.