By Paul S. McNulty, CFP®
In order for you to live out your dream retirement, how much would you guess you’d need to have saved? Or, maybe not your ideal retirement, but at least a realistically comfortable, fulfilling retirement? Would you guess somewhere around a quarter million, or even a half million dollars? If so, you have a fairly common “guesstimate” of the expenses of retirement. According to a report by Merrill Edge, when asked this question, more than half of respondents don’t think they’ll need more than $1 million. (1)
And while having $1 million in your savings account may sound like a lot of money, have you ever really thought about how long that amount will actually last? When you begin to consider inflation, factor in the increased housing costs, account for the likelihood of longer life expectancies and the potential of costly medical needs, that $1 million starts to divvy out among the basics very quickly and may not actually be enough to sustain the retirement you hope for.
The financial requirements of the lifestyle you’d like to live in retirement, the things you want to have and do, is only one part of the equation. Where you choose to reside in retirement will have a big effect on the longevity of your money as well. For example, $1 million in New York City won’t get you nearly as far as it would in Topeka, Kansas. And so the burning question is, just how long will your retirement savings fund your desired lifestyle based on where you live? And is there really that big of a difference?
Thanks to an extensive report compiled by GOBankingRates, (2) we can begin to understand the answer and start planning. By determining the average total expenditures for people age 65 and older, then multiplying them by the cost of living index in each state, the report found the average expenditure cost for each state to determine how many years $1 million will last the average retiree.
Here’s a comprehensive ranking from the most expensive state to the least expensive state:
50. Hawaii
How long $1 million will last: 11 years, 11 months
Hawaii is the most expensive state for several reasons. The cost of groceries, housing, and spending are higher than in any other state.
49. California
How long $1 million will last: 16 years, 5 months
Real estate in California is expensive. While some costs are lower than Hawaii, your retirement fund may not last as long as you’d think.
48. Alaska
How long $1 million will last: 17 years
What makes Alaska particularly expensive is its grocery bill, which is second only to Hawaii. And while housing costs are lower than in many states, other costs of living make up for it.
47. New York
How long $1 million will last: 17 years, 1 month
Utilities are lower in New York than other states, but groceries, housing, and transportation make this state one of the most expensive in which to live.
46. Massachusetts
How long $1 million will last: 17 years, 4 months
Healthcare costs are higher in Massachusetts than all but two other states in the U.S., and only three states pay higher utility bills. As a result, Massachusetts comes with a high cost of living.
45. Connecticut
How long $1 million will last: 17 years, 4 months
Connecticut is almost identical to Massachusetts in terms of costs of living, especially when it comes to healthcare. Connecticut has the fifth highest healthcare costs in the country.
44. Maryland
How long $1 million will last: 17 years, 4 months
It’s housing that’s particularly expensive in Maryland, with the fourth highest housing costs in the country. Transportation is also more expensive, contributing to high cost-of-living expenses.
43. Oregon
How long $1 million will last: 17 years, 7 months
Housing and grocery bills are higher in Oregon than many states, which contribute to the high costs. However, eastern Oregon is considerably less expensive than the western and Portland metro areas.
42. Rhode Island
How long $1 million will last: 18 years, 2 months
Most expenses in Rhode Island are comparable to the rest of the country, but its housing and utilities put this state within the top 10 most expensive places to live.
41. New Jersey
How long $1 million will last: 18 years, 6 months
Housing in New Jersey, along with utilities, make this one of the more expensive states in which to retire.
40. Vermont
How long $1 million will last: 18 years, 7 months
While healthcare costs are only slightly above average compared to the rest of the country, housing, utilities, and many other costs of living are much higher here.
39. New Hampshire
How long $1 million will last: 19 years
New Hampshire retirees can expect utilities and grocery bills that are much higher than the national average.
38. Maine
How long $1 million will last: 19 years, 6 months
While grocery costs are slightly below the national average, many other expenses are above average, including housing and utilities.
37. Washington
How long $1 million will last: 21 years, 1 month
Utility costs in Washington are significantly below the national average. However, housing and other costs will take a bite out of your retirement fund each year.
36. Delaware
How long $1 million will last: 21 years, 10 months
You can expect to find housing, healthcare, and transportation costs below the national average, but pricey groceries and utilities bring up annual costs of living.
35. Pennsylvania
How long $1 million will last: 21 years, 11 months
Healthcare costs are lower here than all but three states, but housing and utilities bring this state up to 16th place for the most expensive states for retirees.
34. Virginia
How long $1 million will last: 22 years
Virginia ranks well in transportation, with the eighth lowest expenses nationwide. And while utility and healthcare costs rank average, housing is what can cost above average.
33. Colorado
How long $1 million will last: 22 years
Housing and healthcare costs are above the national average, but utilities, transportation, and groceries, among other necessities, are cheaper than average.
32. Nevada
How long $1 million will last: 22 years
Nevada ranks similarly to Colorado, especially when it comes to low utilities. However, housing, healthcare, and transportation costs are far above average.
31. South Carolina
How long $1 million will last: 22 years, 3 months
South Carolina has some of the most expensive utilities nationwide, and while grocery bills and healthcare are also above average, housing and transportation costs fall below average.
30. Florida
How long $1 million will last: 22 years, 4 months
Along with expensive grocery costs, the cost of housing, transportation, and utilities are all above average. However, Floridians save in healthcare costs.
29. South Dakota
How long $1 million will last: 22 years, 4 months
The cost of living in South Dakota is just slightly above the national average. And while housing costs come in above the national average, residents pay less for transportation (the fifth cheapest of all states).
28. Minnesota
How long $1 million will last: 22 years, 6 months
Similar to South Dakota, Minnesota is just slightly above average for groceries, transportation, and healthcare costs. But residents can save when it comes to utilities and housing.
27. North Dakota
How long $1 million will last: 22 years, 7 months
Healthcare costs and groceries can be more expensive than the average state, but residents will save in utilities and housing.
26. Montana
How long $1 million will last: 22 years, 10 months
Utilities in Montana are the cheapest in the country, while groceries and healthcare costs are in line with the national average.
25. Illinois
How long $1 million will last: 23 years, 1 month
Coming in at the middle, Illinois retirees will save in terms of healthcare, housing, and groceries, but can expect to pay above the national average for transportation and utilities.
24. Arizona
How long $1 million will last: 23 years, 2 months
While groceries are more expensive than the national average, housing, utilities, transportation, and healthcare costs are all below average.
23. Wisconsin
How long $1 million will last: 23 years, 3 months
Healthcare, utilities, and transportation costs are all higher than the national average, but residents will save considerably when it comes to housing.
22. New Mexico
How long $1 million will last: 23 years, 3 months
New Mexico is almost identical to Wisconsin in terms of annual costs. Utilities, housing, and grocery costs are all below average, but healthcare and transportation costs are slightly above the national average.
21. West Virginia
How long $1 million will last: 23 years, 6 months
The costs of groceries is the only category slightly above average. The cost of housing, healthcare, and utilities are all below average.
20. Wyoming
How long $1 million will last: 23 years, 8 months
We’ve officially reached the top 20 least expensive states for living in retirement! The cost of groceries and utilities is slightly above the national average, but housing costs are far below average, as are the other categories.
19. Kentucky
How long $1 million will last: 23 years, 8 months
Housing is particularly inexpensive in Kentucky, as are groceries and healthcare costs.
18. North Carolina
How long $1 million will last: 23 years, 8 months
North Carolina is cheaper than average for housing, transportation, utilities, and groceries. The only category where it ranks slightly above average is the cost of healthcare.
17. Utah
How long $1 million will last: 23 years, 10 months
Along with the third lowest utility rates in the country, Utah is also known for inexpensive housing. Groceries is the only category where Utah ranks slightly higher than the national average.
16. Nebraska
How long $1 million will last: 23 years, 10 months
Other than transportation, Nebraska living costs are all below average, including housing, utilities, groceries, and healthcare.
15. Louisiana
How long $1 million will last: 23 years, 10 months
Louisiana ranks slightly below the national average for all categories, with the cost of housing ranking significantly below the national average.
14. Ohio
How long $1 million will last: 24 years, 2 months
Ohio has the second lowest annual housing costs across the nation. While transportation is slightly above average, the cost of utilities, healthcare, and groceries is all below average in expenses.
13. Iowa
How long $1 million will last: 24 years, 3 months
Healthcare and transportation costs hover around the national average, but inexpensive housing and groceries make this an affordable state for retirees.
12. Kansas
How long $1 million will last: 24 years, 7 months
Other than housing, which is the ninth lowest cost in the nation, transportation, healthcare, groceries, and utilities are in line with the national average cost.
11. Idaho
How long $1 million will last: 24 years, 8 months
While transportation costs are slightly above average, all other categories rank below the national average, especially when it comes to housing.
10. Alabama
How long $1 million will last: 24 years, 9 months
Alabama makes it into the top 10 with lower-than-average costs for healthcare and housing.
9. Indiana
How long $1 million will last: 24 years, 9 months
In Indiana, all living expenses fall below the national average, especially when it comes to housing costs.
8. Texas
How long $1 million will last: 24 years, 9 months
One of the largest states in the country comes with some of the lowest living expenses. Groceries and housing are fairly inexpensive, and utilities, healthcare, and transportation all cost less than the national average.
7. Missouri
How long $1 million will last: 24 years, 10 months
Utilities may cost slightly more than the national average, but housing is the fourth cheapest in the country.
6. Georgia
How long $1 million will last: 24 years, 11 months
Living expenses in Georgia all fall below the national average, especially when it comes to housing.
These final five states make it possible for retirees to potentially enjoy 25 years in retirement with a $1 million fund.
5. Tennessee
How long $1 million will last: 25 years
The standout category for Tennessee is housing, which is lower than most states.
4. Michigan
How long $1 million will last: 25 years
While healthcare and utilities fall below the national average cost, the greatest advantage is housing.
3. Oklahoma
How long $1 million will last: 25 years, 2 months
All major living costs fall below the national average in Oklahoma, making it easier for retirees to stretch their dollar.
2. Arkansas
How long $1 million will last: 25 years, 6 months
As the second cheapest state in terms of cost of living, healthcare costs are the second lowest in the country, and groceries are the fourth lowest.
1. Mississippi
How long $1 million will last: 26 years, 4 months
Mississippi ranks as the least expensive state to live in, requiring only an average of $37,964 per year for living expenses (compared to $83,000 for Hawaii, the most expensive state).
What’s Next?
With almost a decade and a half on the table between Hawaii and Mississippi this significant amount of time means your retirement account could last almost twice as long in some states than others! And yes, it’s true, lifestyle preferences play a big role in determining how long a $1 million retirement fund will sustain you, but they are clearly not the only significant aspect to consider. These figures further illustrate just how important it is to address average housing costs and other various location-specific factors in your state when calculating how much you’ll need in retirement.
Do you have questions about your retirement savings and how long $1 million may potentially last based on your lifestyle needs? Contact us for a complimentary consultation by calling (781) 995-0253 or email me directly at [email protected] today! We at Boston Metro Advisor look forward to helping you make sure your golden years are as plentiful and as comfortable as possible!
About Paul
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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(1) https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Merrill_Edge_Report_Spring_2018.pdf
(2) https://www.gobankingrates.com/investing/how-long-million-last-retirement-state/2/