American retirees with $1M in savings could go broke much faster in these 5 states — do you live in any of them?
A million dollars seems like a lot of money, but even with seven figures in savings, careful spending is necessary to live comfortably throughout your golden years.
Don't miss
Cost-of-living in America is still out of control — use these 3 'real assets' to protect your wealth today, no matter what the US Fed does or says
Don’t leave your family unprotected — find life insurance coverage up to $2 million with no medical exam or blood test
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
One way to do that is by relocating to a less expensive state. You might be able to trim your costs through researching just how expensive housing and health care are as well as other non-financial factors like climate and crime. That can help you stretch your savings, though the math can be complex.
The most and least expensive states for retirement
Hawaii, Massachusetts, California, New York and the District of Columbia are the most expensive places to retire, according to a recent study of annual expenses in retirement. West Virginia is the least expensive state to retire in, followed by Mississippi, Oklahoma, Kansas and Alabama.
The study looked at how long $1 million would last in each state based on annual expenditures. In Hawaii, $1 million in savings would give you a good foundation for nine years, seven months and 28 days with annual expenses of $103,610. In West Virginia, your savings would last twice as long at 20 years, three months and 19 days with annual expenses of $49,261.
So what’s driving up the cost of living for those 65 years and older? Housing and health care are the biggest culprits. Hawaii has the highest average annual housing costs at $35,813, while West Virginia has the lowest at $7,264. Alaska also has the highest average health care costs at $11,227, while Arkansas and Alabama have the lowest at $6,469.
Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
There’s more to the financial picture
Although average housing and health care figures are a good place to start for retirees, other factors should be considered beyond how long your $1 million in savings will last.
First, your savings likely won’t be your only income. Most people receive Social Security benefits — as of June 2024, the average monthly benefit for a retired worker was $1,918.28, or about $23,000 per year. This would extend $1 million in Hawaii to just under 12.5 years.
Second, if you keep your $1M invested and can expect a 6% average annual return – profit that comes from interest payments, dividends and capital gains – and inflation at 3%, your money will last an additional 4.58 years in Hawaii.
On the expenses side, you’ll need to account for taxes. The most recent data, from the fiscal year 2022, shows the highest state and local tax burdens as a percentage of income were found in New York (15.9%), Connecticut (15.4%), Hawaii (14.1%), Vermont (13.6%) and California (13.5%). The lowest burdens are in Alaska (4.6%), Wyoming (7.5%), Tennessee (7.6%), Texas (8.6%) and Oklahoma (9.0%).
Think about more than just finances
Finances aside, moving represents a major life change—and affordability is only one factor you’ll need to consider. Moneywise ranked the best states to live in, taking into account the cost of living, housing affordability and quality of health care, as well as climate, crime and net migration.
South Carolina emerged as the best state to retire in, followed by Florida, Alabama, North Carolina and Mississippi. The least desirable places were Alaska, the District of Columbia, New York, Vermont, Montana and Massachusetts.
On a personal level, you’ll need to evaluate what’s most important. For instance, is living close to family and friends worth more to you than saving money on groceries and gas? Or are you simply in love with the wide-open spaces of your more northern location (despite the frigid winters)?
Retirement planning is complex. Deciding whether to move to extend the life of your savings requires an understanding of your future financial needs. It’s wise to consult a professional who can help you reach an answer.
Remember that retirement is an important stage of your life, and finances aren’t the only consideration in your pursuit of happiness in your golden years.
What to read next
Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month
Berkshire icon Charlie Munger believed homeownership is for families who want to live in them — not single people. Here’s how to invest in real estate no matter your marital status
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
