Retirement in Oregon: Taxes and Cost of Living
Oregon runs the opposite trade from most retirement states. Nothing at the register, quite a lot on the return. Social Security is exempt, retirement withdrawals are not, and a credit many retirees counted on ended after 2025.
See how long your savings will last in Oregon
State tax takes a real bite here, so the size and order of your withdrawals matter. Run your numbers in the retirement calculator.
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Oregon retirement tax rules
Oregon taxes income on a graduated schedule running from 4.75% to a top rate of 9.9% (Oregon Department of Revenue). Withdrawals from 401(k)s and IRAs and most pension income are taxed as ordinary income at those rates.
Social Security escapes entirely. Oregon subtracts on the state return whatever amount landed in your federal income. Federal retirees get a second break: a pension earned for service before October 1, 1991, may be subtracted in whole or in part.
One thing changed for 2026. The retirement income credit under ORS 316.157 may not be claimed for tax years beginning on or after January 1, 2026. Retirees who used it through 2025 should plan for a higher Oregon bill, since nothing replaced it directly.
Oregon also has the country's lowest estate tax threshold. Estates worth $1 million or more must file, with rates running from 10% to 16% (Oregon estate transfer tax). A paid-off house and a healthy 401(k) can cross that line without the owner ever thinking of the estate as large.
Cost of living in Oregon
The statewide index is around 113, above the national average of 100 (MERIC). Housing sets the tone, with Portland and Bend at the top of the range and the coast pulled upward by second-home demand.
No sales tax pulls in the other direction. Every purchase costs less than the same purchase in Washington or California, which shows up most on cars, appliances, and medical equipment. For a retiree whose spending exceeds their taxable income, that gap partly offsets the income tax rates.
Does Oregon tax retirement income?
Most of it, yes. Social Security is exempt and the rest is taxed as ordinary income. Here is how the four most common sources are treated.
| Income type | Taxed in Oregon? | Details |
|---|---|---|
| 401(k) / IRA withdrawals | Yes | Taxed as ordinary income at 4.75% to 9.9%. |
| Pension income | Yes, mostly | Federal pensions for service before October 1991 may be subtracted. |
| Social Security benefits | No | Fully exempt. Subtracted from federal income on the Oregon return. |
| Capital gains | Yes | Taxed as ordinary income. No preferential state rate for long-term gains. |
Federal tax stacks on top of these rates. The retirement tax calculator estimates that federal share.
Best places to retire in Oregon
Bend
High desert on the east side of the Cascades, with dry air, sunshine, and trails and rivers at the edge of town. St. Charles anchors healthcare for the region. Bend's popularity has pushed housing to the top of the state's range, so the lifestyle carries a real price.
Eugene
Home to the University of Oregon, Eugene brings concerts, a strong library system, and PeaceHealth hospitals to the southern Willamette Valley. Housing prices below Portland and Bend. Winters are gray and wet, which is the standing trade for valley living.
Medford and Ashland
Southern Oregon gets more sun and milder winters than the valley. Medford serves as the practical hub, with Asante's medical center. Ashland adds the Oregon Shakespeare Festival and a walkable downtown at a higher price point.
Salem
Salem sits an hour from both Portland and the coast, with housing costs under either. Government employment gives the city a stable base, and Salem Health covers most care without a drive to Portland.
Corvallis
Small, flat, and bike-friendly, built around Oregon State University. Retirees get lectures, a farmers market, and Good Samaritan Regional Medical Center in a town of about 60,000. Housing runs above Salem, below Portland.
Oregon pension system
Oregon PERS covers state agency staff, public school teachers, and most local government employees. Members hired after August 2003 fall under the Oregon Public Service Retirement Plan, which pairs a smaller pension with an individual account program. Benefits are taxable in Oregon.
Oregon PERS benefits paid to nonresidents are not subject to Oregon tax, which is why some members compare states before retiring. The pension calculator estimates the monthly benefit from service and salary.
Calculators for your Oregon retirement
Retirement Tax Calculator
Estimate the federal tax on your withdrawals and Social Security benefits.
Retirement Income Calculator
See how long your savings last with Social Security, pension, and tax-aware withdrawals.
Pension Calculator
Estimate a PERS or private pension benefit from years of service and salary.
Retirement Calculator
Project whether your savings will support the retirement you want, at any age.
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