It used to be a distant financial goal, but a new study of the cost of retirement, state by state, has revealed the extent to which the price of getting out of the workforce can vary wildly from state to state in America. Some Americans can save significantly more than $1 million in order to retire comfortably, and others might save much less depending on their desired retirement location.
The results indicate stark disparities between the amount of retirement income that is required to ensure a comfortable standard of living for retirees in different states based on recent estimates of retirement costs and living expenses. Among the most significant drivers of retirement affordability are housing, healthcare, taxes and cost of living.
Hawaii is at the high end of the scale, where it’s the most expensive state to retire. After accounting for the Social Security benefits, estimates for a comfortable retirement life may be more than $150,000 per year for retirees. That’s the equivalent of saving about $5,800 a month for someone who is starting to save at 20 years old and is considering retirement at the age of 68. For those who begin late, monthly savings might be even higher.
California is right behind with the rising costs of housing and taxes still continuing to increase the expense of retirement. According to analysts, the Golden State may need to pay more than $120,000 a year to maintain a comfortable standard of living for its retirees, which means making long-term financial plans is important.
Other states like New York, New Jersey and Massachusetts are also high-cost places to retire, primarily because of high property taxes, health care costs, and prices. Such costs can come as a surprise to retirees, particularly those who are on a fixed income, financial experts say.
In contrast, southern and Midwest states provide much less affordable retirement opportunities. One area that was pointed out as being one of the least expensive places to retire is West Virginia, and it’s around $33,000 a year after Social Security benefits. Other states that offer more affordable pensioner housing include Mississippi, Tennessee and Arkansas.
Florida has long been regarded as a place to retire, and it ranks in the middle of the pack. The state has seen an increase in housing prices and is still a popular place to retire, thanks to the warm weather and lack of a state income tax. The amount of income a retired person may need after Social Security is added to his or her income is estimated to be about $63,000 per year.
There is no single “magic number” for retiring, experts say. The typical American thinks they should have about $1.46 million saved when they retire, but it really is a function of where they live, their lifestyle, their medical requirements and their life expectancy. The retirement needs of a person with a low cost of living in a state can be significantly less than those of a person who will be living in a high-cost coastal location.
