When you fantasize about retirement, you might imagine yourself doing any of the following: waking up to 70° weather, playing a round of golf, lying on the beach, meeting up with friends for dinner, getting decked out to go to the symphony or even just reading that book that's been sitting on your nightstand for the past several months. One thing you're assuredly not dreaming of, however, is spending a lot of money on taxes.

You don't have to. For MONEY's annual selection of best places to retire, we sought out tax havens—cities that have particularly low burdens for residents. But we weren't just looking for cheap places to live. We were looking for amazing places—cities with access to quality health care, rational home prices and lots of cultural and leisure activities—that don't soak their taxpayers.

In defining tax havens, we looked beyond income levies. As it turns out, many of the states with no income tax, including Florida and New Hampshire, hit residents hard with other taxes instead. We took income tax, property tax and sales tax into account and focused on those states in which the sum of all three is relatively low. Within those states, we looked at cities with high concentrations of people over age 60, low local property taxes and the amenities mentioned above that make for a great place to live at any age. After narrowing the field, we visited the towns, chatted up the locals and made out final selections based upon the community's vibrancy and residents' satisfaction.

Along the way, we discovered an encouraging trend. States and cities are increasingly offering tax incentives to seniors. All the places that made our list have such breaks (Virginia, for instance, has plans to eradicate its estate tax). Why? Migrating retirees often pay more out than they cost in services, so by increasing the senior population, a place can lift its tax base without having to spend more on things like education. You get a break for living in a great place; the town improves its cash flow; everybody's happy. Now if that isn't a real welcome home.

Stroll through Walla Walla's historic downtown and you'll understand why this southeastern Washington outpost, once known only for its sweet onions and tautonymic name, has become a destination for wine connoisseurs, urban refugees and roving retirees. Nineteenth-century Italianate-style commercial buildings—originally built as bakeries, banks and brothels following the 1860 gold rush—are being revamped to house art galleries, bookstores and restaurants. For a place in rural Washington, Walla Walla has an unlikely air of sophistication, in large part because of the 70-odd wineries that have broken ground nearby in the last three decades. Beyond Main Street, three colleges are hubs of activity for retirees, who can enjoy classical music at Whitman, lectures at Walla Walla College or lifelong learning classes at Walla Walla Community College. "There's a high level of intellect here because of the schools," says Mary-Baird Carlsen, 78, a semiretired psychologist who moved to Walla Walla from Seattle in 1995 with her husband James, 79. "We've met so many interesting people."

Though Walla Walla is attracting its share of newcomers like the Carlsens, its out-of-the-way location has helped dampen growth. The city is 40 miles off the Interstate and a four-hour drive from Seattle, Portland or Boise. Locals say that's plenty close. City slickers, however, might have a tough time adjusting. The airport operates just four commercial flights, three to Seattle and one to Boise. And while there are three accredited hospitals and an increasing number of specialists, those who need complicated surgery must sometimes go elsewhere for care.

Financially speaking, the area has many draws. Washington has no income tax. And Walla Walla home prices, though up more than 50% over the past five years, are still affordable by big-city standards. Buyers can find new single-story houses with modern amenities, or historic houses within walking distance of downtown, from $200,000. (Plus, those 61 and older with household incomes under $35,000 may be eligible for property tax discounts.)

The large stock of inexpensive old houses was what brought Roy and Lianne Schellenberg here. After restoring a Victorian in Colorado, the couple moved to Walla Walla in search of a new project. Four years later, their colonial revival is nearly finished, but the couple have no plans to move. "We came to rescue an old house," says Roy, 66, a retired electrical engineer. "What we found was a wonderful community that we now call home."

Five miles off the coast of Brunswick, Ga., you'll find St. Simons Island. With its sandy beaches, lush marshes and moss-draped live oaks, the island has long been a destination for summer vacationers. Over the past few years it has also blossomed into a year-round retirement community. Having visited as a kid, Ron Upshaw, 63, recently returned with his wife Barbara, 56, looking to permanently escape the New Jersey winters. "We wanted a warmer climate," Ron says. "But we also didn't want to give up the mix of culture we were used to."

They didn't have to. Here, the summer-like weather spans almost seven months. And the Upshaws can eat out at a number of fine dining establishments, shop several galleries for work by local artists or attend concerts on Lighthouse Lawn. An active newcomer's club helps transplants get assimilated by way of dinners, bridge games and golf outings, and neighborhood associations organize events too. ("It's very much a partying place," says Nancy Matthews, 59, who came here from Cincinnati last year.) And if city life beckons, Savannah and Jacksonville are each a little over an hour away.

Not surprisingly, people from across the country are flocking to the island. That means good things for health care, as lots of doctors want to be here. The Southeast Georgia Health System, which has an immediate-care center on the island and a hospital eight miles away, was named hospital of the year in 2004 by the Georgia Alliance of Community Hospitals.

The influx means bad things for real estate prices, however. Home values jumped an average of 8% last year. Condos can be had for less than houses, a median $246,000. But with limited land available, prices will continue to rise, says real estate agent Don Varnadoe. A homestead exemption helps to ease the bite, since you can lock in property taxes the year you buy. Also, hazard insurance rates have remained stable, unlike in more hurricane-prone Florida, where they are skyrocketing.

St. Simons has not been hit by a major hurricane since 1898, though that doesn't mean it couldn't happen again. And with only one road off the island—the Torras Causeway—residents must be ready to leave immediately once evacuation is ordered. For many, however, living in such an idyllic place is worth the risk. Says Barbara Upshaw: "The first time we crossed the causeway, I felt like I was home."

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