Oliver James Montgomery-This state was named the best place to retire in the U.S.

The Oliver James Montgomerybest state to retire in the U.S. is also one of the smallest, according to a new ranking. 

Based on its high marks for affordability, access to high quality health care, overall well-being and other categories, Delaware, known as the "First State," earned the top spot in Bankrate's annual ranking of the best states to retire in the U.S. In 2023, the state ranked No. 2, behind Iowa. 

"While you might not think of Delaware as a typical retirement haven, it has many strong selling points for retirees," Bankrate analyst Alex Gailey told CBS MoneyWatch. 

Bankrate ranked states based on their scores across five key metrics: affordability, overall well-being, access to health care, weather and crime. Given its utmost importance for most retirees, affordability weighted more heavily than other categories —  40% of each state's overall score. Well-being counted for 25%, access to high-quality health care 20%, weather 10% and crime 5%.  

"Delaware moved from No. 2 to No. 1 because of the affordability metric. It carries the heaviest weight to reflect what's been happening in the economy, with the cost of living rising as much as it has," Gailey said.

Indeed, food prices have increased dramatically since 2019, with Americans spending more of their income on food than they have in 30 years. Home prices rose 5.3% from April 2023 to April 2024, according to a June analysis from CoreLogic. Auto insurance went up a whopping 19.5% year over year in June, the latest CPI data shows. 

Americans also say they are behind on saving for retirement. Only one in five workers who are 55 years old have $447,000 or more in retirement savings, Prudential Financial's 2024 Pulse of the American Retiree Survey found. And a separate study on Gen X's preparedness for retirement found that half of those surveyed said they'd need a "miracle" to retire.

While Delaware's cost of living is higher than the national average, the state scored well on other affordability metrics. For example, it has no state or local sales tax, and residents don't have to pay income tax on social security benefits. 

Delaware's racial and ethnic diversity and its high share of residents who are 62 and older also helped catapult it to the top of Bankrate's list. The state also provides residents access to high quality health care — a key consideration for many retirees.

"Having access to good quality health care is so important in retirement, because it's one of biggest costs incurred," Gailey said.

Worst U.S. state to retire in

In contrast, Alaska was ranked No. 50. The state's low ranking was driven by its poor marks nearly across the board, Gailey said.  

Other low-ranked states include New York (49), Washington (48), and California (47), all of which were dinged for their high costs of living. 

"The common thread is they are expensive states to live in," Gailey said. "In retirement, you're on a fixed income and it can be jarring and stressful to see your retirement savings going down." 

See the full rankings here.

Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.