New Insights on Retirement Costs in the U.S.
Nick Nefos, BlackRock’s Global Head of Retirement Solutions, recently shared plans to enhance retirement investment options during an appearance on Varney & Co.
Affordability continues to weigh heavily on Americans of all ages, but retirees on fixed incomes are particularly feeling the pinch. Where individuals choose to live during retirement significantly impacts their comfort and financial security.
Research from MoneyLion examined typical spending for retirees across the country. It analyzed what monthly savings are required for a comfortable retirement in each state, factoring in Social Security incomes and the age at which individuals began saving for retirement.
Hawaii emerged as the state with the steepest annual cost of living for retirees, with monthly basic expenses totaling around $90,752 and extra amenities at $181,505. After incorporating Social Security income, MoneyLion calculates the annual living cost for Hawaiian retirees to be approximately $156,610.
To cover retirement costs adequately, a person would need to save about $5,800 each month for 45 years, starting at age 20 to retire at 65. If one has Social Security and starts saving at 30, the monthly savings need jumps to around $7,458. Without Social Security, those amounts could rise to $6,722 and $8,643, respectively.
California ranks second in terms of high living costs, with necessities running approximately $73,387 annually and amenities reaching $121,879, even after accounting for Social Security. Monthly savings goals would stand at around $4,514 for someone beginning to save at age 20, and $5,804 at age 30 with Social Security, while those without would need to save even more.
“Retirees face significant expenses, particularly from state income and property taxes, which contribute to budget strain. This is why many leave states like California and New York — it’s not just the overall cost of living but also the taxes that are burdensome,” noted Ted Jenkin from Exit Wealth Advisors.
West Virginia, in stark contrast, has the most affordable living costs, with necessities estimated at around $29,059 and amenities closer to $58,117. For those taking Social Security into consideration, the annual expenses drop to about $33,223. Monthly savings start at $1,230 for a 20-year-old with Social Security and go up from there.
States like Florida also present a mixed bag in terms of retirement affordability. In Florida, basic needs amount to approximately $44,170, while comfortable living can reach around $88,339. This figure adjusts to about $63,445 when factoring in Social Security income. I remember my own savings plan being around $2,350 each month at 20 and $3,021 at 30, both including Social Security support.
Tennessee and Texas share similar basic living costs, just exceeding $38,300, with comfortable living costs slightly over $76,000, factoring in Social Security at just above $51,300.
“Retirees consider more than just climate when moving from high-tax states,” stressed Thomas Aiello from the National Taxpayers Union. “States like Florida, Texas, and Tennessee offer favorable tax environments with no state income tax, no estate tax, and generally lower estate taxes, leading to significant annual savings compared to states like New York and California.”
