Americans of all ages are facing affordability concerns, with retirees on fixed incomes in particular feeling the strain – though where they choose to live in their golden years has a big impact on their ability to live comfortably.
A study by MoneyLion analyzed the monthly savings needed to retire comfortably across states after accounting for the national average expenses for retired households, as well as whether the retiree would have Social Security income and when the retiree began saving for retirement.
The report found that the state with the highest annual cost of living for retirees was Hawaii, with an annual cost of $90,752 for necessities and $181,505 for a comfortable cost of living based on the analysis.
After accounting for Social Security income, MoneyLion estimated the annual cost of living as a retiree in Hawaii was $156,610.
To save enough money to afford that cost of living in retirement, a person would have to save $5,800 a month over 45 years at age 20 before retiring at age 65, or $7,458 a month if they saved for 35 years starting at age 30, with Social Security income.
Those figures rise to $6,722 and $8,643 a month, respectively, without Social Security.
California had the second-highest annual cost of living, which MoneyLion estimated at $73,387 for necessities or $121,879 for the comfortable cost of living metric that accounts for Social Security income.
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The monthly savings would be $4,514 when starting at age 20 or $5,804 starting at age 30 with Social Security, while those would rise to $5,436 and $6,989 without Social Security.
“Two of the biggest expenses a retiree needs to look into are the state income taxes and real estate property taxes that will factor into your budget. It’s also why so many people are moving out of places like California and New York, because, beyond the cost of living, it’s very expensive from a taxation perspective,” Ted Jenkin, managing partner at Exit Wealth Advisors, told FOX Business.
The lowest cost state analyzed in the report was West Virginia, which had an annual necessities cost of living of $29,059 with the comfortable cost of living at $58,117 per year, or $33,223 after accounting for Social Security income.
The monthly savings target for West Virginia would start at $1,230 for those age 20 or $1,582 at age 30 with Social Security income, and those would rise to $2,152 and $2,767, respectively.
Other states that have been popular relocation destinations were the middle ground of the analysis in terms of cost of living.
Florida’s was $44,170 for necessities or $88,339 for the comfortable cost of living, declining to $63,445 with Social Security income in the mix. Savings targets were $2,350 starting at 20 or $3,021 at 30, with Social Security to supplement those savings.
Tennessee and Texas were each slightly above the $38,300 mark for their necessities cost of living, with the comfortable cost of living just over $76,000 or more than $51,300 with Social Security.
“There’s a reason beyond the weather for why retirees are moving from high-tax states,” Thomas Aiello, National Taxpayers Union vice president of federal affairs, told FOX Business.
“Places like Florida, Texas, and Tennessee offer no state income tax, no estate (“death”) tax, relatively low property taxes, and a policy environment generally more favorable to taxpayers. That can result in thousands of dollars in annual tax savings compared to New York, California or Illinois.”
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