The Lonestar State has a few notable cities, but one of the under-the-radar Texas cities to explore as a place to settle down in retirement is Fredericksburg. Though it only has a small population of around 10,875, it has grown 4.9% since 2020. And, that population skews older, with a median age of 50.7, and nearly 1 in 3 residents aged 65 or older.
Located west of Austin and north of San Antonio in Texas Hill Country, Fredericksburg earned its place on our list of the best places to retire in the South. Here’s a hint as to why: its overall affordability, Texas’ lack of income taxes, quaint small-town charm, and natural beauty. Learn more about what Fredericksburg has to offer.
Key Takeaways
- Fredericksburg, Texas, offers a wide range of housing options, many of which are affordable, especially for people relocating from higher-cost areas.
- As one of the few states with no personal income tax, Texas is an attractive option for retirees living on a fixed income.
- Fredericksburg offers a warm climate, strong healthcare, outdoor activities, and a food and wine culture for retirees.
Below-Average Cost of Living
Though Fredericksburg isn’t the most affordable place to retire in the South, it has just a slightly higher average housing cost than the South overall, keeping it in the top 10 areas for affordability. Fredericksburg has a median monthly housing cost of $1,254 compared to $1,163 across the South, or about 8% higher.
Homes in Fredericksburg are a bit pricier than some other areas. As of October 2024, the median home price is $530,706, which is above the median national sales price of $420,400 as of the third quarter of 2024. However, you can certainly find homes in the $300,000s or even less.
Note
For renters, starting costs are around $1,150 per month. Compared to the national median rent of $1,394, renting in Fredericksburg may be among the more affordable options.
Why This Is Key to An Affordable Retirement
Housing is the top expenditure for Americans, accounting for 32.9% of all household spending in 2023, according to the Bureau of Labor Statistics. Therefore, one of the best ways to ensure that you spend less in retirement is to choose a location and a home that is affordable to you.
There are a few places in the South that are less expensive than Fredericksburg when it comes to housing, but the good news is there is a wide range of home prices, and renting is relatively affordable, so you should be able to find a place to live that suits your budget.
Tip
Are you considering buying a property in this city? Make sure you get the best mortgage rate possible.
No State Property Taxes
Texas indeed has no state property taxes, but the county collects taxes. For Gillespie County, where Fredericksburg is located, the average tax rate is 1.140%. That means the average property tax would be $6,050 on a home with a median price of $530,706.
While that’s not inexpensive, it’s a lower rate than you’d pay in a larger Texas city like Austin (Travis County), where the average tax rate is 1.770%.
Why This Is Key to An Affordable Retirement
Even if you’re buying a home with cash, property taxes are an ongoing expense you will have to deal with, and you should pay close attention to what it will cost. Depending on where you’re relocating from, property tax in Fredericksburg might actually be cheaper for you.
For example, if you’re used to owning a home in a state like New York or New Jersey, where the property tax rate is very high, your bill will decrease significantly in Fredericksburg. That being said, it may be on the high side compared to other Southern cities.
Below-Average Income Tax
Texas is one of just seven states with no individual income tax—and that’s a big deal for people living on a retirement budget. For comparison, the top income tax rate in New Mexico is 5.9%, while in California, it climbs to 13.3%.
State and local sales tax is also lower than most at 8.20%. In fact, Texas ranks 4th in the nation for that metric. When you combine not having any income tax and a low state and local sales tax, these two aspects of the Texas tax code help residents keep more money in their pockets, which is important to people living on a fixed income.
Why This Is Key to An Affordable Retirement
No income tax states like Texas are sometimes referred to as “pension friendly” and tend to be popular with retirees. This is because residents don’t have to pay taxes on their pensions, social security benefits, or distributions from IRAs or 401(k)s. Depending on your retirement income, not having to pay income tax on it can equate to thousands of extra dollars you get to keep.
Lower state and local sales tax can also help your money go further when buying groceries and other necessities. Those small savings add up over time and give retirees extra spending power.
Other Surprising Perks of Fredericksburg, Texas for Retirees
If you’re someone who loves wine, you’ll be pleased to learn that Fredericksburg is in the heart of Texas wine country. There are more than 60 wineries, vineyards, and wine-tasting rooms to explore. The city has also continued to be a center of German-American culture dating back to its founding by German settlers back in 1846.
Active retirees and nature lovers will also enjoy Enchanted Rock State Natural Area, which has 11 miles of hiking trails, as well as the lakes and beautiful wildflowers that grow in the spring. It’s also designated by the International Dark Sky Association as a great place to enjoy star gazing.
Tip
Cultural events like the Gillespie County Fair are also held in Fredericksburg, as well as annual Oktoberfest and Food and Wine Festivals.
Fredericksburg residents have access to quality healthcare, with Methodist Hospital Hill Country providing a full suite of medical services.
Bottom Line
If you’ve been thinking of settling down in Texas or somewhere in the South for your retirement years, Fredericksburg is worth a look. It’s a small but growing city that offers something for everyone and is attracting more older residents each year.
From a financial perspective, Texas’ favorable tax treatment and the area’s lower cost of living, especially compared to more expensive urban areas, allows retirees to stretch their budgets a bit more. Add to that a pleasant climate, solid healthcare, and an eclectic town culture, and Fredericksburg might be a short-list contender for 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:
- Housing affordability relative to the South (how each place’s monthly housing costs compare with a weighted average for states in the South);
- Median income in each place (as a proxy for taxes collected, which may be related to community resources; and
- Individual reporting on proximity to parks or coastlines, recent changes in the community, and previous reporting highlighting the best places to retire.