Home Investment Where Should You Retire? Guide To Retirement Costs In All 50 States

Where Should You Retire? Guide To Retirement Costs In All 50 States

by admin

According to a 2018 Bankrate survey, 61% of Americans have absolutely no idea how much money they’ll need to retire. This data coupled with the fact that you’re reading this article likely means you don’t know either.

Unfortunately, this question has a complicated answer. With details like cost of living and tax rates fluctuating across the country, experts have encouraged Americans to save anywhere from $700,000 to $2 million for retirement. Nevertheless, location can serve as an informative tool as you prepare for retirement — whether it’s decades down the road or just around the corner!

To discover how much you’ll need and why, take a look at the data below, outlining the annual cost of living and estimated retirement savings needed in all 50 states!

How much does it cost to retire in America?

Based on the average annual spending among seniors and the average life expectancy after age 65, Americans need roughly $987,000 to retire in America. However, the range of recommended savings for retirees across the nation seesaws around this number — from $300,000 less to $1 million more. Consequently, how much you should save for a stable and comfortable retirement depends on a variety of factors, with location playing a pivotal role.

When it comes to details like the cost of living and taxes, no two states are created equal. For instance, estimates from MarketWatch indicate you’ll need close to $700,000 to retire in a state like Mississippi or Oklahoma, where costs like transportation and housing are low. However, in a scenic state like Hawaii, research suggests residents set aside more than $2 million to compensate for factors like higher tax rates

Furthermore, even if you have saved for many years and accounted for necessary costs like housing and health care, your savings may not be adequate for the retirement you want. In fact, some resources recommend adding 20% to account for a “comfortable” lifestyle.

To find out how much your retirement may cost, start with essential planning elements like your state’s cost of living and your total tax burden, then incorporate any added expenses or personal goals you anticipate.

How does a state’s cost of living impact your retirement?

Depending on what state you call home, your annual living expenses can swing from $42,000 all the way up to $102,000.

According to data from the Missouri Economic Research and Information Center (MERIC), areas of the United States, like the Northeast and the West Coast, can be significantly more expensive than others, such as the Midwest. MERIC’s research factors in a wide range of expenses to develop their cost of living index, from groceries and housing to transportation and health care.

Take housing, for example. In New Mexico, rent for a two-bedroom apartment will cost you roughly $847 per month, on average. Meanwhile, the same setup in California is nearly triple the cost, at an average of $2,495!

You can find similar disparities in the simplest of purchases. In Kansas, where the cost of living index is 87.9, goods and services are available for an average of 10% less, when compared to costs nationwide. However, if you meander up north to New York, groceries, transportation, and utilities are all above the U.S. average — which helps explain why New York’s cost of living index is the fourth-highest in the nation at 139.1.

How do state taxes impact your retirement?

Where Should You Retire? A Comprehensive Guide To Retirement Costs In All 50 States - How do state taxes impact your retirement?

Most Americans know they’ll need more income to retire comfortably in Hawaii than they would in Alabama; however, be sure to consider the role of taxes in your calculations, as they determine how much cash stays in your pocket.

For those looking to save in retirement, relocating to a state with lower taxes may be a viable solution. Wyoming and Nevada, for example, are two of seven states with no state income taxes. Delaware is another especially attractive option for retirees, with no taxes on Social Security, no local and state taxes, as well as no inheritance or personal property taxes. All three states offer low property taxes as well, ranging from $600 to $700 on average for $100,000 in home value. All this data considered, it’s no surprise that Wyoming, Nevada, and Delaware made Personal Capital’s list of the top ten best states to retire in

Fortunately, there are other ways of minimizing your tax burden, such as saving in a Roth IRA or setting up Social Security tax withholding, that is considerably less disruptive than a move.

What else to consider as you calculate retirement costs?

In addition to factors like your state’s taxes and cost of living, there are several other details that can help inform your retirement planning.

Average retirement savings

First, you can evaluate how much current retirees are setting aside for retirement in your state. In general, many states with higher expenses and taxes — such as northeastern states like Connecticut and New Jersey — are collecting more cash for retirement, while those with fewer costs are saving less.

Population over 65

If your state has a higher percentage of residents who are retirement-age, it can be a good indicator of the area’s affordability, and desirability, among retirees. For example, Arizona’s cost of living is relatively low, which may explain why 17.6% of Arizona’s population are 65 or older (according to USAToday), which is a higher percentage than the total U.S. population.

Life expectancy

While expenses and taxes can help us understand why experts recommend higher and lower retirement savings for each state, how long residents are expected to live influences these estimates as well.

Mississippi, for instance, has the lowest recommended retirement savings according to gobakingrates.com, while Hawaii requires the most; however, these states are also polar opposites in terms of average life expectancy. Mississippi’s average life expectancy is the lowest in the nation, at 74.5 years, while Hawaii’s is the highest, at 81.5. Consequently, experts encourage residents of Hawaii to save for longer than those in Mississippi.

How much does it cost to retire in each state?

Where Should You Retire? A Comprehensive Guide To Retirement Costs In All 50 States - How much does it cost to retire in each state?

Listed below are estimates from GoBankingRates for each state’s annual cost of living (before deducting Social Security) and recommended retirement savings (assuming the retiree pulls 4% from savings each year). However, there’s more to retirement planning than these numbers alone.

As mentioned above, and demonstrated below, Mississippi is considered the most affordable state. Compared to the nationwide estimate for retirement savings mentioned earlier in this article — $987,000research recommends a mere $666,772 in retirement savings for Mississippi residents. Despite this data, retirees are not flocking to Mississippi. In fact, the state with the highest percentage of residents age 65 and older is Maine, at 20.6%, next to Mississippi’s 15.9%. 

Consequently, the research below includes two additional factors worth considering as you plan for retirement:

  1. The state’s total tax burden and the percentage of residents 65 and older.
  2. Additionally, following each bullet point is the state’s ranking in terms of desirability/affordability among retirees.

For instance, Alaska ranks #1 in the category of “total tax burden,” since Alaska’s taxes are just 5.16% overall, compared to New York’s 12.28%. However, in the category highlighting each state’s percentage of residents age 65 and older, the highest percentage — Maine’s 20.6% — ranks #1.

Alabama

  • Annual cost of living: $45,265 (#7).
  • Retirement savings: $723,989 (#7).
  • Total tax burden: 7.36% (#9).
  • Population 65 and older: 17.0% (#15).

Alaska

  • Annual cost of living: $64,846.50 (#44).
  • Retirement savings: $1,213,517 (#44).
  • Total tax burden: 5.16% (#1).
  • Population 65 and older: 11.9% (#35).

Arizona

  • Annual cost of living: $50,809.14 (#28).
  • Retirement savings: $862,583 (#28).
  • Total tax burden: 8.25% (#20).
  • Population 65 and older: 17.6% (#11).

Arkansas

  • Annual cost of living: $44,197.34 (#3).
  • Retirement savings: $697,288 (#3).
  • Total tax burden: 8.98% (#32).
  • Population 65 and older: 16.8% (#17).

California

  • Annual cost of living: $71,102.28 (#49).
  • Retirement savings: $1,369,911 (#49).
  • Total tax burden: 9.27% (#38).
  • Population 65 and older: 14.3% (#31).

Colorado

  • Annual cost of living: $52,640.10 (#34).
  • Retirement savings: $908,357 (#34).
  • Total tax burden: 8.40% (#25).
  • Population 65 and older: 14.2% (#32).

Connecticut

  • Annual cost of living: $63,676.72 (#43).
  • Retirement savings: $1,184,272 (#43).
  • Total tax burden: 9.99% (#45).
  • Population 65 and older: 17.2% (#13).

Delaware

  • Annual cost of living: $54,725.36 (#36).
  • Retirement savings: $960,488 (#36).
  • Total tax burden: 5.52% (#2).
  • Population 65 and older: 18.7% (#6).

Florida

  • Annual cost of living: $50,046.24 (#27).
  • Retirement savings: $843,510 (#27).
  • Total tax burden: 6.82% (#5).
  • Population 65 and older: 20.5% (#2).

Georgia

  • Annual cost of living: $45,824.86 (#10).
  • Retirement savings: $737,976 (#10).
  • Total tax burden: 7.98% (#15).
  • Population 65 and older: 13.8% (#33).

Hawaii

  • Annual cost of living: $102,381.18 (#50).
  • Retirement savings: $2,151,884 (#50).
  • Total tax burden: 11.48% (#49).
  • Population 65 and older: 18.4% (#7).

Idaho

  • Annual cost of living: $48,215.28 (#19).
  • Retirement savings: $797,736 (#19).
  • Total tax burden: 7.93% (#14).
  • Population 65 and older: 15.9% (#24).

Illinois

  • Annual cost of living: $48,469.58 (#22).
  • Retirement savings: $804,094 (#22).
  • Total tax burden: 9.62% (#42).
  • Population 65 and older: 15.6% (#27).

Indiana

  • Annual cost of living: $46,130.02 (#11).
  • Retirement savings: $745,605 (#11).
  • Total tax burden: 8.01% (#16).
  • Population 65 and older: 15.7% (#26).

Iowa

  • Annual cost of living: $46,994.64 (#15).
  • Retirement savings: $767,220 (#15).
  • Total tax burden: 9.53% (#41).
  • Population 65 and older: 17.0% (#15).

Kansas

  • Annual cost of living: $44,451.64 (#4).
  • Retirement savings: $703,645 (#4).
  • Total tax burden: 8.83% (#31).
  • Population 65 and older: 15.9% (#24).

Kentucky

  • Annual cost of living: $47,299.80 (#18).
  • Retirement savings: $774,849 (#18).
  • Total tax burden: 8.80% (#30).
  • Population 65 and older: 16.4% (#21).

Louisiana

  • Annual cost of living: $47,248.94 (#17).
  • Retirement savings: $773,578 (#17).
  • Total tax burden: 9.15% (#37).
  • Population 65 and older: 15.5% (#28).

Maine

  • Annual cost of living: $59,658.78 (#40).
  • Retirement savings: $1,083,824 (#40).
  • Total tax burden: 10.57% (#47).
  • Population 65 and older: 20.6% (#1).

Maryland

  • Annual cost of living: $65,863.70 (#45).
  • Retirement savings: $1,238,947 (#45).
  • Total tax burden: 9.34% (#40).
  • Population 65 and older: 15.4% (#29).

Massachusetts

  • Annual cost of living: $66,270.58 (#46).
  • Retirement savings: $1,249,119 (#46).
  • Total tax burden: 8.76% (#29).
  • Population 65 and older: 16.5% (#20).

Michigan

  • Annual cost of living: $45,621.42 (#9).
  • Retirement savings: $732,890 (#9).
  • Total tax burden: 8.27% (#21).
  • Population 65 and older: 17.2% (#13).

Minnesota

  • Annual cost of living: $51,165.16 (#29).
  • Retirement savings: $871,483 (#29).
  • Total tax burden: 10.19% (#46).
  • Population 65 and older: 15.8% (#25).

Mississippi

  • Annual cost of living: $42,976.70 (#1).
  • Retirement savings: $666,772 (#1).
  • Total tax burden: 9.06% (#33).
  • Population 65 and older: 15.9% (#24).

Missouri

  • Annual cost of living: $45,316.26 (#8).
  • Retirement savings: $725,261 (#8).
  • Total tax burden: 7.90% (#12).
  • Population 65 and older: 16.9% (#16).

Montana

  • Annual cost of living: $54,827.08 (#37).
  • Retirement savings: $963,031 (#37).
  • Total tax burden: 7.22% (#8).
  • Population 65 and older: 18.8% (#5).

Nebraska

  • Annual cost of living: $46,638.62 (#13).
  • Retirement savings: $758,320 (#13).
  • Total tax burden: 9.10% (#35).
  • Population 65 and older: 15.8% (#25).

Nevada

  • Annual cost of living: $52,284.08 (#33).
  • Retirement savings: $899,456 (#33).
  • Total tax burden: 8.39% (#24).
  • Population 65 and older: 15.7% (#26).

New Hampshire

  • Annual cost of living: $54,572.78 (#35).
  • Retirement savings: $956,674 (#35).
  • Total tax burden: 6.85% (#6).
  • Population 65 and older: 18.1% (#9).

New Jersey

  • Annual cost of living: $63,269.84 (#42).
  • Retirement savings: $1,174,100 (#42).
  • Total tax burden: 9.88% (#44).
  • Population 65 and older: 16.1% (#23).

New Mexico

  • Annual cost of living: $45,112.82 (#6).
  • Retirement savings: $720,175 (#6).
  • Total tax burden: 8.74% (#27).
  • Population 65 and older: 17.6% (#11).

New York

  • Annual cost of living: $68,661.00 (#47).
  • Retirement savings: $1,308,879 (#47).
  • Total tax burden: 12.28% (#50).
  • Population 65 and older: 16.4% (#21).

North Carolina

  • Annual cost of living: $48,215.28 (#20).
  • Retirement savings: $797,736 (#20).
  • Total tax burden: 8.17% (#18).
  • Population 65 and older: 16.3% (#22).

North Dakota

  • Annual cost of living: $49,130.76 (#26).
  • Retirement savings: $820,623 (#26).
  • Total tax burden: 8.06% (#17).
  • Population 65 and older: 15.3% (#30).

Ohio

  • Annual cost of living: $47,198.08 (#16).
  • Retirement savings: $772,306 (#16).
  • Total tax burden: 9.34% (#39).
  • Population 65 and older: 17.1% (#14).

Oklahoma

  • Annual cost of living: $43,790.46 (#2).
  • Retirement savings: $687,116 (#2).
  • Total tax burden: 6.94% (#7).
  • Population 65 and older: 15.7% (#26).

Oregon

  • Annual cost of living: $69,678.20 (#48).
  • Retirement savings: $1,334,309 (#48).
  • Total tax burden: 8.34% (#23).
  • Population 65 and older: 17.6% (#11).

Pennsylvania

  • Annual cost of living: $51,266.88 (#30).
  • Retirement savings: $874,026 (#30).
  • Total tax burden: 8.53% (#26).
  • Population 65 and older: 18.2% (#8).

Rhode Island

  • Annual cost of living: $60,269.10 (#41).
  • Retirement savings: $1,099,082 (#41).
  • Total tax burden: 9.84% (#43).
  • Population 65 and older: 17.3% (#12).

South Carolina

  • Annual cost of living: $48,367.86 (#21).
  • Retirement savings: $801,551 (#21).
  • Total tax burden: 7.48% (#10).
  • Population 65 and older: 17.7% (#10).

South Dakota

  • Annual cost of living: $49,079.90 (#25).
  • Retirement savings: $819,352 (#25).
  • Total tax burden: 7.86% (#11).
  • Population 65 and older: 16.6% (#19).

Tennessee

  • Annual cost of living: $44,604.22 (#5).
  • Retirement savings: $707,460 (#5).
  • Total tax burden: 6.18% (#3).
  • Population 65 and older: 16.3% (#22).

Texas

  • Annual cost of living: $46,791.20 (#14).
  • Retirement savings: $762,134 (#14).
  • Total tax burden: 8.20% (#19).
  • Population 65 and older: 12.5% (#34).

Utah

  • Annual cost of living: $48,927.32 (#24).
  • Retirement savings: $815,537 (#24).
  • Total tax burden: 8.75% (#28).
  • Population 65 and older: 11.1% (#36).

Vermont

  • Annual cost of living: $58,743.30 (#39).
  • Retirement savings: $1,060,937 (#39).
  • Total tax burden: 10.73% (#48).
  • Population 65 and older: 19.8% (#4).

Virginia

  • Annual cost of living: $51,724.62 (#31).
  • Retirement savings: $885,470 (#31).
  • Total tax burden: 7.93% (#13).
  • Population 65 and older: 15.5% (#28).

Washington

  • Annual cost of living: $56,454.60 (#38).
  • Recommended retirement savings: $1,003,719 (#38).
  • Total tax burden: 8.32% (#22).
  • Population 65 and older: 15.4% (#29).

West Virginia

  • Annual cost of living: $46,486.04 (#12).
  • Retirement savings: $754,505 (#12).
  • Total tax burden: 9.06% (#34).
  • Population 65 and older: 20.0% (#3).

Wisconsin

  • Annual cost of living: $48,774.74 (#23).
  • Retirement savings: $811,723 (#23).
  • Total tax burden: 9.12% (#36).
  • Population 65 and older: 17.0% (#15).

Wyoming

  • Annual cost of living: $51,877.20 (#32).
  • Retirement savings: $889,284 (#32).
  • Total tax burden: 6.47% (#4).
  • Population 65 and older: 16.7% (#18).

How can I prepare for retirement?

Start. Saving. Now.

According to the National Institute on Retirement Security,

nearly 40 million working-age households (45%) do not own any retirement account assets.”

If you are among these families, start saving today with an IRA, 401(k), or another retirement-specific account. Not only do these accounts restrict your access to the funds, but they also offer special tax benefits to help you save more and avoid having to work in your retirement years.

However, even if you have been adding cash to your IRA for years, research says your trajectory may still need some fine-tuning. According to a 2019 GoBankingRates survey, 64% of Americans are expected to retire with less than $10,000 in their retirement accounts. Fortunately, there are plenty of financial services available to help you manage and multiply your savings.

Betterment, for example, offers a unique tool called RetireGuide, which helps investors determine their annual spending during retirement and how much they’ll need to set aside to meet that goal. In fact, for a low annual fee of 0.25%, Betterment’s comprehensive, tailored retirement advice can help increase your after-tax retirement savings by as much as 38.8%

Reputable robo-advisor Weathfront, offers a similar resource through Path, their free financial planning service. Whether you decide to roll over your retirement accounts to Wealthfront or not, Path evaluates your current financial status and habits, factoring in details like inflation and Social Security, to help ensure you’re set for a healthy and happy retirement.

Or, if you’re interested in a wider range of account options, E*TRADE may be a better fit. Founded in 1982, E*TRADE is a pioneer in the online trading industry and offers just about every investment opportunity you could want, including Traditional, Roth, Rollover, and SEP IRAs with no monthly or annual fees.

Summary

You may dream of retiring in a quaint, historic town or a bustling, beachy paradise, but the financial burdens of one state — or the incentives of another — may change your mind.

For many retirees, relocation provides the perfect solution to a lack of sufficient retirement savings. Florida, for example, is often rated as one of the best places to retire. Not only is Florida’s cost of living relatively inexpensive, but low taxes — at just 6.82% overall — add to this sunny state’s affordability. It’s no surprise that 20.5% of Florida’s residents are 65 and older!

However, if you want to avoid a future in which your finances dictate your residence, adjust your budget now! As you contribute to your IRA or 401(k), consider the annual expenses and recommended retirement savings for your state. Once you’ve identified the amount you’ll need, utilize a resource like Personal Capital’s free retirement planner to see if your current saving and spending patterns have set you on the right track!

Read more:

related posts

Leave a Comment