Key Takeaways
- Hawaii has the highest annual cost of living for retirees at $156,610 after accounting for Social Security income.
- To afford retirement in Hawaii, one must save $5,800 monthly over 45 years starting at age 20, or $7,458 monthly for 35 years starting at age 30 with Social Security.
- West Virginia is the lowest-cost state for retirees, with an annual necessities cost of $29,059 and a comfortable living cost of $58,117.
As individuals approach retirement, financial strain becomes a pressing concern, especially for those living on fixed incomes. The state where one chooses to retire can significantly influence their financial wellbeing during these years. A recent study conducted by MoneyLion delves into the monthly savings required for a comfortable retirement across various states, factoring in national average expenses for retired households, Social Security benefits, and the age at which savings commence.
The research highlights Hawaii as the state with the steepest annual cost of living for retirees. The estimated monthly expenses for basic necessities in Hawaii reach a staggering $90,752. When considering a comfortable lifestyle, this figure escalates to $181,505 monthly. After taking Social Security income into account, the projected annual living expense for retirees in Hawaii stands at approximately $156,610.
To meet this financial demand, a retiree would need to save substantial amounts monthly: $5,800 if they begin saving at age 20 and retire at 65, or $7,458 monthly if they start saving at age 30. Should they not receive Social Security benefits, those figures increase to $6,722 and $8,643, respectively.
Following closely is California, where the annual cost of living for retirees is estimated at $73,387 for essentials and $121,879 for a more comfortable lifestyle that includes Social Security benefits. For those starting to save at age 20, the required monthly savings would be $4,514, while those starting at age 30 would need to save $5,804. Without Social Security, these amounts rise to $5,436 and $6,989, respectively.
Ted Jenkin, managing partner at Exit Wealth Advisors, emphasizes the importance of considering state income taxes and property taxes in retirement planning. He notes that these aspects are driving many retirees to relocate from high-cost areas like California and New York, given the significant burden of taxes in addition to the cost of living.
On the other end of the spectrum, West Virginia emerges as the state with the lowest annual cost of living. Here, the estimated annual expenses for necessities are about $29,059, with a comfortable lifestyle costing around $58,117 annually. When accounting for Social Security income, this number drops to $33,223. Monthly savings requirements in West Virginia start at $1,230 for individuals who begin saving at age 20, or $1,582 for those starting at age 30. Without Social Security, these amounts would increase to $2,152 and $2,767, respectively.
Several states known for their attractive retirement conditions fall in the middle range of this analysis. For instance, Florida’s annual costs are approximately $44,170 for necessities, while a comfortable lifestyle requires around $88,339. After factoring in Social Security, the expenses decrease to $63,445. Monthly savings targets in Florida are set at $2,350 for those starting at age 20 and $3,021 for those starting at age 30 with the help of Social Security.
Tennessee and Texas also present relatively affordable living costs, each slightly exceeding the $38,300 mark for essential expenses. The comfortable living standard in these states goes beyond $76,000 annually, dropping to over $51,300 when Social Security is included.
Thomas Aiello, vice president of federal affairs at the National Taxpayers Union, points out that retirees are increasingly drawn to states that offer favorable tax conditions. Florida, Texas, and Tennessee, which impose no state income tax, no estate tax, and have relatively low property taxes, represent an appealing option compared to states like New York, California, or Illinois. This shift can lead to significant annual tax savings, amounting to thousands of dollars for retirees.
In conclusion, the decision of where to retire is not solely based on lifestyle preferences but also on financial implications. As retirees navigate their golden years, understanding the cost of living in different states, alongside tax considerations, can make a substantial difference in their quality of life.
