(MONEY Magazine) – The best sign that you've really, truly grown up may be having fantasies of retirement. Perhaps it's days in the garden or on the links; perhaps it's volunteering at a local soup kitchen, taking the classes you didn't have time for in college or launching a new career.

Whether you see yourself enjoying the stimulation of a city or the quiet of the sea-side, MONEY's fourth annual selection of best places has a spot to suit every taste.

What makes a best place to retire? We always look for a wide range of activities, high-quality medical care, reasonable taxes and housing costs and, since travel is important to many retirees, easy access to airports. But this year, given the fiscal travails of so many states, we paid extra attention to their financial stability, screening out those that are running high deficits and facing substantial tax hikes or service cutbacks. (That's why you won't see any California towns on our list this year. The state's projected $34.6 billion deficit and limping technology industry make the future cost of living too unpredictable for us to suggest a move there. Washington State, though struggling with its deficit, is in better shape than its Pacific Coast neighbors.)

We also screened out states where large numbers of seniors have complained that it's hard to find a doctor who is accepting new Medicare patients, although we won't guarantee that you'll be able to locate your own Dr. Kildare in any of our picks.

On to the best places, listed in order, roughly, from east to west across the U.S., ending in Mexico. Each community has a distinctive quality, but residents of every one told us that people are "so friendly." Read on and discover eight places to daydream about.

PORTSMOUTH New Hampshire

POPULATION: 20,784 PERCENTAGE OF POPULATION OVER 65: 23.4% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $309,000 NEAREST MAJOR CITY: BOSTON (50 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 78ºF/25ºF

--There are two things you must love if you're going to live in a place like Portsmouth, N.H.: the cold and history. This year 125 inches of snow fell on Portsmouth, and there were several long stretches when the temperature didn't rise above freezing in New Hampshire's oldest town. Vicky and Robert Haft, 71 and 72, respectively, left a Manhattan co-op in a doorman building in 1989 for a historic two-story house with sidewalks to shovel. But when spring comes around and they begin planting in the backyard, they unearth relics from their house's previous owners. "It's like an archaeological dig here," says Vicky.

The town grew out of a land grant from the King of England to the governor of Newfoundland 400 years ago; the land is now the site of the Strawbery Banke historical museum along the Piscataqua River. Because of the port, which is still active, the town was once a rowdy gathering place for sailors. These days, though, you're more likely to see Dockers-wearing management types by the docks. At the height of the dotcom frenzy, more than 400 Internet companies operated from Portsmouth. With the boom came stylish restaurants and a buzzing night life that survived the bust. And you don't even have to make the short drive down to Boston for culture: Portsmouth has a respected repertory theater, concerts at the Music Hall, more than 100 eateries and continuing education classes at the University of New Hampshire in Durham, just 10 minutes away.

For retirees, other attractions include the highly regarded Portsmouth Regional Hospital, which has recently added a cardiac unit, and the city's proximity to Boston, home to some of the world's best hospitals. There's no income tax or sales tax, and the city's property tax rate is reasonable, at 1.9% of assessed value. The state sponsors a drug assistance program for seniors. Plus, New Hampshire is the safest state in the nation, according to FBI statistics.

If you're moving to Portsmouth for the history, you may be hard-pressed to find an older home in good condition in central Portsmouth. But waterfront warehouses have been converted into condo lofts (prices average about $450,000) and new developments and old farmhouses on half-acre lots are available in nearby Dover, Durham and Stratham.

And what about the snow? Enjoy it, as Joan and Donald Holroyd, 69 and 72, do. Some years they ski into Tuckerman's Ravine at Mount Washington on the Fourth of July.

SAVANNAH Georgia

POPULATION: 131,600 PERCENTAGE OF POPULATION OVER 65: 8% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $204,546 AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 90.8ºF/37.9ºF

--Old Savannah is quiet, dark and deep. Its historic district, planned by city founder James Oglethorpe in 1733 as a grid of houses punctuated by parks (22 of the original 24 remain), is shaded by live oaks and Spanish moss and swathed in ivy and wisteria. It is mysterious, elegant, enchanting--and mansions that were crumbling 30 years ago now sell for millions. Smaller homes too are being snapped up.

Outside the district, retirees are flocking to newer suburbs by the water or adjacent to golf courses. Homes in gated communities feature access to golf courses, tennis courts, walking trails, the Savannah River and the Atlantic. Prices in these subdivisions range from around $200,000 to $2 million or more. People living near the water look out over wetlands that are havens for birds (and alligators, but more on that later). "I've learned more about birding during the six years I've lived here than in my entire life," says Pat Eilender, 58, a retired teacher who relocated in 1997 with her husband Albert, 60, a semiretired chemicals executive.

The Eilenders bought land in Savannah in 1992. They wanted to retire on the East Coast (where their children and grandchildren are) in a warm place on the water. Florida was Albert's choice, but after traveling there, the couple changed their minds. A conversation with a business contact led them to The Landings on Skidaway Island, a gated waterfront community with golf courses, tennis courts and a fitness center. "In Florida, we found that a lot of people came down for a couple of winter months and disappeared," Albert says. "In Savannah, most people are there full time, so you can establish friendships that are like family." Adds Pat: "I found that many developers in Florida mowed everything down. Here, the developers made a real effort to preserve the trees." The pair spent $100,000 on the land and about $650,000 on construction. Today, their house, with 5,200 square feet and a wetlands view, is worth approximately $1.2 million.

Savannah's retirees can enjoy the culture and night life of a sophisticated city and take part in a wide variety of volunteer opportunities, from repairing homes for the elderly through United Way to raising funds for the new addition to the Telfair Art Museum. There's even a magazine, Coastal Senior, that covers doings along the Georgia and South Carolina coasts. The Memorial Health hospital system has highly rated cardiac and rehabilitative services.

Both the city and the state are on secure financial footing, but that comes at a price. Residents pay state income tax (top rate, 6%), sales tax (6%) and property tax (1.7% of an assessed value that's 40% of fair market value), which Pat Eilender says is comparable to what she paid in New Jersey. Though she loves Savannah, it's no bargain.

And the alligators? "They don't really venture away from their own lagoons until they get pretty big," Pat says. "Then the town takes them away." Her tax dollars at work.

LARGO Florida

POPULATION: 69,371 PERCENTAGE OF POPULATION OVER 65: 30.1% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $150,900 NEAREST MAJOR CITY: ST. PETERSBURG (15 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 82.5ºF/60.5ºF

--Sitting on his porch before heading to a softball game, Ronald Renz, a 66-year-old Largo transplant from Georgia, remembers what he told his wife when she recently suggested a vacation: "I said, Why? This is paradise!"

Located in the bustling Tampa Bay area, Largo has remained quaint, affluent and clean, while St. Petersburg and Clearwater have sprawled. After a boom in the 1960s and 1970s, Largo's population has hovered around 70,000. Its parks and golf clubs have room to breathe, and its citizens don't take that for granted. "If you could bottle our weather and sell it, you'd be a millionaire overnight," says Jim Miles, 82.

Largo, just a short drive from St. Petersburg and Tampa, is just what most people think of when they hear the phrase "retirement community." The weather is dependably warm (with humid, tolerable summers), rain is infrequent and snow is unthinkable. Beachfront condos are surrounded by palm trees, and dozens of beaches are easy to reach.

Because nearly one-third of the population is over 65, there's a strong retiree culture. Renz captains a softball league with around 200 members and spends much of his time playing in tournaments and relaxing with fellow athletes. "You meet people there, you meet people in church," he says. "It's easy to meet new people." The 256-bed Largo Medical Center lies within the city limits, and other, larger hospitals are less than 30 minutes away. The city is safe, with a low crime rate. The town's relative racial diversity supports a wide variety of restaurants, and early-bird specials are everywhere.

Florida has a sales tax (6%) but no income tax, and the state's budget problems have little effect here. Slow growth has kept housing costs low, and the cost of living is slightly below the national average. So retirees who want to have fun with their nest eggs can enjoy the five golf clubs within the city limits and maintain boats in the Gulf of Mexico.

The city's cultural life is improving. A bigger library is set to open in 2005. The Largo Cultural Center hosts popular musical revivals, but for big names you'll need to drive or take the public bus to St. Petersburg or Tampa.

FRANKLIN Tennessee

POPULATION: 47,500 PERCENTAGE OF POPULATION OVER 65: 7.4% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $270,000 NEAREST MAJOR CITY: NASHVILLE (18 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 89ºF/25ºF

--Franklin, just 18 miles south of Nashville, remains a small town, with a Victorian downtown district that's listed in the National Register of Historic Places. "You'd be blown away by Main Street and the old traffic roundabout," says Charles Edmondson, 62, who moved here from Texas in 1997. If the restaurants, shops and golf courses (four public courses, five private clubs) aren't enough to occupy you, you can head into Nashville for football (Titans), hockey (Predators) and music.

"My perception is that parents follow their children down here," says Franklin's city administrator, Jay Johnson. Younger adults are attracted by Tennessee's stable economy and job market, then their parents visit and fall in love with the mild climate, rolling hills and relaxed atmosphere--and the fact that Tennessee levies no income tax (though investment income is taxed). Franklin hasn't raised its property taxes for 13 years and has no plans to do so. Zoning in town is flexible, with stand-alone houses and townhouse developments that cater to empty-nesters (prices average around $120,000).

Tom Feuerborn, 65, is a case in point. After retiring from the military in 1990, he and his wife Vicky, 64, settled in Oklahoma. But their daughter and son-in-law lived in Franklin, and after years of frequent visits, the Feuerborns moved here in 1997. When they're not cheering their grandson at baseball games, they eat out and attend the community theater. Tom, a former colonel, keeps up with military affairs through the Middle Tennessee Retired Officers Association. Vicky is on the board of their homeowners association, and Tom was elected alderman. "People blend right in when they move here," he says. "When you pass people on the street, they smile and say hello; it's just friendly," adds Edmondson. "My wife and I chuckle at what people here call a traffic jam."

ANN ARBOR Michigan

POPULATION: 114,024 PERCENTAGE OF POPULATION OVER 65: 8% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $210,000 NEAREST MAJOR CITY: DETROIT (43 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 71.5ºF/24ºF

--Ann Arbor, home to the University of Michigan, is small enough to be friendly but cosmopolitan enough to satisfy retirees like Marina Brown, 65. A Brazilian who moved here in 1989 with her husband Richard, 68, she's found it easy to continue her political and cultural pursuits.

With its 38,000 students and Gothic architecture, the university is at the center of the city's cultural life, from plays at the Lydia Mendelssohn Theater to live music at The Ark. Home games of the school's sports teams are marquee events. And, jokes Helen Thomas (class of '55), "if you support the teams, you can be an alum," wherever you went to school.

There's more to Ann Arbor than reliving your college days. The world-class Fisher Theatre in Detroit and the Detroit Institute of Arts are less than an hour's drive away. A host of beautiful lakes and beaches are even closer. If you want more than Ann Arbor's 147 parks, you can join the Bicycle Touring Society or the Ski Club, which organize safe and reasonably priced trips throughout the state.

Real estate prices have been escalating in Ann Arbor but are still not exorbitant. These days a three-bedroom home goes for around $210,000. Barbara Olsen-Forest, 81, pays $1,300 a month for her large condo. Property taxes are based on a complex scheme of valuations that have been known to make homeowners reach for the Advil; this year the tax on a typical three-bedroom house is expected to be about $4,755. Most living costs are manageable. The state income tax is a flat 4%, sales tax is 6%, traffic tickets can be paid for under $10, and there's no shortage of restaurants where a full breakfast or hearty lunch will barely break the $5 mark. Michigan also offers several discount-drug plans for seniors.

Still, these are just details. People move to Ann Arbor, says Thomas, because "they fall in love with the city. It's a city of smart people, and they attract more smart people, so you're not going to be bored."

ST. GEORGE Utah

POPULATION: 49,663 PERCENTAGE OF POPULATION OVER 65: 17% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $200,000 NEAREST MAJOR CITY: LAS VEGAS (120 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 103ºF/29ºF

--St. George is in Southwest Utah's "color country"--red rocks, deep blue sky, snow-capped mountains in the distance. Just minutes from Snow Canyon and about two hours from Zion National Park, the Grand Canyon and Bryce Canyon--as well as the man-made monuments of Las Vegas--this town is a mecca for active retirees.

"Wherever you turn here, it's beautiful," says John Castle, 78, a retired college professor who moved here from Michigan with his wife Audrey, 78, in 1992. Town facilities include tennis courts, a large pool (with special classes for people with arthritis or other disabilities), golf courses and 35 miles of walking trails. Each October, the Huntsman Senior Games attract about 5,000 athletes to St. George for competitions in the triathlon, biking, softball and more.

But you don't have to be an athlete to love St. George. Dixie State College, located in town, offers classes and trips for seniors. Tuacahn Theater stages plays and concerts in a natural amphitheater of red rock; Southern Utah University, a few miles away, runs an annual Shakespearean festival; and an all-volunteer community theater puts on musical shows.

Residents credit the active cultural life to two factors: the proximity to Las Vegas, which helps Tuacahn snag nationally recognized performers, and the large Latter-day Saints community. "The Mormons foster culture within their own families, so you have an enormous number of people who take pleasure in drama, singing groups, playing music," explains Sandy Armbruster, 60, who is not a Mormon but is a big fan of the group's emphasis on the family. "Kids are polite and know how to speak to adults. It's not what I'm accustomed to, coming from the Northeast."

Because of its size, St. George has only one hospital, but a second is scheduled to open this year. The tiny airport will be opened to jets around 2005. In the meantime, people drive to the Las Vegas airport when they want to travel.

There are drawbacks: One is heat. St. George is at the northern tip of the Mojave Desert. The dry, sunny climate that attracts snowbirds in winter can turn broilerlike in summer (last year the mercury hit 113F). In addition, the continuing drought has residents voluntarily rationing water and anticipating a hike in their water bills down the road.

Water issues aside, life in St. George tends to be inexpensive. Property taxes are low, less than 1% of assessed value for full-time residents (second-home owners pay slightly more). "A lot of people come here from California," says John Castle, "and for the price of their old house, they can buy two in St. George." Utah's income tax tops out at 7%; its sales tax is 6.125%. There is an estate tax, but the state follows the federal rules, so assets up to $1 million are exempt.

BELLINGHAM Washington

POPULATION: 67,171 PERCENTAGE OF POPULATION OVER 65: 12.4% MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $170,000 NEAREST MAJOR CITIES: VANCOUVER, B.C. (60 MILES); SEATTLE (90 MILES) AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 75ºF/32ºF

--There are few places where you can walk out of a 20-story building, cast a line into a creek and catch a salmon. Bellingham is one. It sits on Bellingham Bay and has three freshwater lakes plus scads of streams. "Where else do you have lakes and ocean in one place?" marvels Sita Amba-Rao, 67, a retired economics professor who arrived in 2000.

About midway between Seattle and Vancouver, Bellingham has metropolitan ambitions without big-city hassles. Western Washington University's drama department stages regular productions, and Village Books in the Fairhaven historic district is a nexus of intellectual exchange. Marinas and boat slips abound, and the Interurban Trail System goes through town to Larrabee State Park. Skiers head for Mount Baker, an hour east, or Canada's Mount Whistler, about two hours away.

Snow is rare in Bellingham itself. Rain is a different matter. The city has 93 days of rain a year. On the plus side, summer temperatures rarely top 80F.

Housing is affordable compared with the East and other West Coast areas. "Our house is bigger and cheaper than our old house in Seattle," says Ann Carr, 60, of the 3,000-square-foot home she shares with her husband Gene, 63. The Carrs paid $329,000 for a four-bedroom house just yards from a marina where they keep a boat; access to a golf course is included in their association fees. One caveat: Prices rose 9.8% in 2002, according to the Whatcom County Association of Realtors, and are expected to go up another 10% this year. Property taxes are a tolerable 1.18% of assessed value.

Bellingham is well served by St. Joseph's Hospital, which has recently added a cardiac-care unit. However, seniors say the state's health maintenance organizations, touted as an alternative to Medicare, have not delivered care they promised, and physicians are dropping out of networks. Crossing into Canada to buy cheaper prescription drugs is common. The Carrs even pop over the border for dental care.

LA PAZ Baja California, Mexico

POPULATION: 170,000 NUMBER OF U.S.CITIZENS: 3,500 MEDIAN PRICE OF SINGLE-FAMILY THREE-BEDROOM HOUSE: $110,000 AVERAGE ANNUAL HIGH/LOW TEMPERATURE: 96ºF/54ºF

--La Paz is more a Mexican city than an expatriate's haven, but for those who love magnificent seaside sunsets, sugary beaches, sailing, diving--and the ability to stretch a retirement dollar till it squeals--La Paz is a superb choice. The capital of the southern half of the Baja peninsula, La Paz is located on the Sea of Cortez, just 90 miles from Cabo San Lucas. Like Cabo, La Paz has great deep-sea fishing and a desert climate; unlike Cabo, La Paz is light on tourist resorts. "Ten years ago, you couldn't even find La Paz in a travel agency," says Sidne Byars Herrero, a realtor who caters to Americans. "It's a real Mexican town." Mexican culture predominates, down to the architecture, which goes back to the town's founding in the 16th century.

The expat community in La Paz is small but growing, and new developments, including gated communities, promise to bring in more. Retirees spend time at the marina, enjoy the restaurants and take courses at the city's universities. Bridge groups meet weekly, as do tennis groups and a writer's circle. The town square has live music almost every night. The Malecon, a palm-lined sea wall, is the place to take in the breeze after sunset. There are miles of beaches north of the city and three undeveloped islands open to kayakers, divers and sailors. The whales swim by in February, the dolphins in summer. However, summer is hot, and many expats return to the States from May to October.

There are some legal challenges to retiring in Mexico. Although you can collect Social Security there, you can't use Medicare outside the U.S.; if you choose to return to the U.S., you'll need to re-establish residency before you can reinstate coverage (unless you continue to spend part of the year in the States). You can, however, use private American health insurance.

Rentals in areas favored by Americans can be hard to find; owning property is more common--but also more complicated. Mexican law forbids foreigners from owning land within 50 kilometers (about 31 miles) of the coast. You can buy land through a Mexican bank by using a mechanism called a trust deed, or fideocomiso. The deed is owned by the bank, but it gives the beneficiary rights to the land for 50 years and can be renewed. The house belongs to the beneficiary free and clear.

How secure are trust deeds? "There have been problems, some very notable cases--not with the deeds in question but with title to the land itself," says Liza Davis, public affairs officer at the U.S. Consulate in Tijuana, who notes that the title insurance American homeowners count on is less common in Mexico. There is one U.S. company that issues title insurance on Mexican real estate, Stewart Title Guaranty. Its website, www.stewart.com, is loaded with information on how to buy real estate in Mexico. Davis suggests that any buyer use an expert Mexican real estate attorney. The consulate will provide a list of qualified attorneys on request.