Want to make your money stretch further in retirement? Where you live is a huge part of the equation, and these states are the most affordable.
New Study: You Can Retire in These U.S. States on Less Than $65,000 a Year
Published on Oct. 31, 2024
Plenty of people know exactly where they want to retire—perhaps by their favorite golf course or near their kids and grandkids. But for other folks, the specific location is less important than finding places to retire around the world where they get the most bang for their buck, alleviating some of the financial stress of retirement. After all, the post-work years should be a relaxing and relatively carefree time of life.
While most of us understand that money doesn’t buy happiness, a lack of funds can lead to stressors that degrade our quality of life. With the cost of living seemingly eternally on the rise, Social Security probably isn’t going to be enough to live on. Yet according to the U.S. Department of Labor, “only about half of Americans have calculated how much they need to save for retirement.” And despite the fact that most Americans spend about 20 years in retirement, only a quarter of private-industry workers contribute to 401(k) or other defined contribution plans.
The fact is, retirement is more expensive than people think. Experts estimate people need 70% to 90% of their pre-retirement income to maintain the same standard of living after they retire. So it’s more important than ever for seniors to settle down in areas of the country that won’t stretch them financially. With that in mind, GoBankingRates determined the cost of a comfortable retirement in each state. Read on to learn how the states stack up when it comes to cost of living and find out the best places to retire in the United States on less than $65,000 a year.
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How did the study determine the most affordable states?
To land on the states where you can retire the most comfortably for the least amount of money, GoBankingRates started by asking this question: How much money do people really need in retirement? Because everyone has different needs, there’s no one-size-fits-all answer, but there are some ways to get a rough idea of how much you need to save before you can retire.
It starts with determining how much the average person spends in retirement. The experts at GoBankingRates examined data on people ages 65 and older, drawing from a U.S. government survey. “The conclusions are based on the Bureau of Labor Statistics’s 2023 Consumer Expenditure Survey,” explains certified financial planner Michelle Kruger, PhD, the director of financial planning at Gratus Capital in Atlanta. “GoBankingRates adjusted the average consumer expenditures by the Missouri Economic Research and Information Center’s 2024 quarter-two cost-of-living index for each state to calculate total consumption expenditures.”
The study zeroed in on a few key areas of senior spending. Stephen Kates, a certified financial planner and the principal financial analyst for RetireGuide, explains that GoBankingRates ranked spending in five categories to create a baseline for the cost of living in each state. “To determine a ‘comfortable’ retirement income, each total was increased by 20% to account for added room in the budget,” Kates says. “The categories GoBankingRates tracked were groceries, health care, housing, utilities and transportation.”
Which state is the least expensive for retirees?
The least expensive state for retirees is West Virginia. That’s not super surprising—West Virginia is also the most affordable state in the country for people of all ages, largely because of housing affordability.
“The expected cost of living in West Virginia for the five spending categories tracked was $48,492, and the ‘comfortable’ retirement income number was $58,190,” Kates points out.
What other states round out the top five?
West Virginia was only slightly more affordable than the second least expensive state, Oklahoma. “Joining West Virginia in the top five are Oklahoma, Kansas, Alabama and Mississippi, each offering affordability due to their lower cost of living and health care options,” says Tyler Meyer, a certified financial planner and the founder of Kansas-based Retire to Abundance.
Here’s how much you’ll need annually to retire comfortably in the five most affordable states:
- West Virginia: $58,190
- Oklahoma: $59,995
- Kansas: $60,620
- Alabama: $61,176
- Mississippi: $61,315
Meyer’s client base consists mainly of Kansas retirees, and he wasn’t surprised to see his state on the list of places where a person can retire on less than $65,000. In Kansas, that number is much less: GoBankingRates puts the expected cost of living at $50,517, with a comfort buffer bringing retirement costs up to $60,620.
“Housing here is incredibly affordable, and even though the population is lower, there are still population centers that provide health care and any other amenities that you may be searching for,” Meyer says. “As a cherry on top, all of these lower cost-of-living states also have long-term care costs that are significantly below the U.S. average.”
What state is the most expensive for retirees?
Hawaii is the most expensive state for retirees, which shouldn’t come as a surprise since Hawaii wins the “most expensive” prize for most items. It’s a spendy place to live, with the cost of a comfortable retirement coming in at $129,296, significantly higher than the next most expensive state, California.
“Despite its appeal, high housing costs and overall expenses push the annual retirement figure above $129,000, which can make it out of reach for many retirees,” Meyer says.
Why does the Aloha State cost so much? Its distance from the mainland plays a major role. “The cost of goods is very high in Hawaii due to import costs, but the degree to which it is more expensive than California is still a bit surprising,” Kruger adds.
Here’s how much you’ll need annually to retire comfortably in the five most expensive states:
- Hawaii: $129,296
- California: $100,687
- Massachusetts: $100,201
- Alaska: $86,868
- New York: $85,480
Where does your state rank?
According to the GoBankingRates data, this is how much you’d need to retire comfortably in each state, from the most affordable to the most expensive.
- West Virginia: $58,190
- Oklahoma: $59,995
- Kansas: $60,620
- Alabama: $61,176
- Mississippi: $61,315
- Arkansas: $61,454
- Missouri: $61,454
- Iowa: $62,565
- Indiana: $62,704
- Tennessee: $62,704
- Georgia: $63,398
- Michigan: $63,745
- Louisiana: $63,954
- Texas: $64,162
- Kentucky: $64,301
- North Dakota: $64,440
- Illinois: $64,787
- Nebraska: $64,856
- South Dakota: $64,856
- New Mexico: $64,995
- Ohio: $65,273
- Montana: $65,689
- Minnesota: $65,828
- Wyoming: $66,037
- Pennsylvania: $66,384
- Wisconsin: $67,356
- South Carolina: $67,773
- North Carolina: $68,398
- Delaware: $70,064
- Idaho: $70,203
- Virginia: $70,342
- Colorado: $70,689
- Nevada: $71,314
- Utah: $71,453
- Florida: $71,592
- Arizona: $76,730
- Maine: $77,286
- Connecticut: $78,605
- Rhode Island: $78,744
- New Hampshire: $78,883
- New Jersey: $78,952
- Oregon: $79,230
- Vermont: $79,647
- Washington: $79,925
- Maryland: $80,688
- New York: $85,480
- Alaska: $86,868
- Massachusetts: $100,201
- California: $100,687
- Hawaii: $129,296
Don’t forget about taxes
Although the GoBankingRates study provides valuable information for retirees deciding where to retire, there are some factors they didn’t consider, like taxes. “What I think that specific article misses is the tax treatment of retirement income,” says Elizabeth Pennington, a certified financial planner at Fearless Finance. “For example, some states don’t tax Social Security, pension income or retirement account withdrawals, so your dollars go further even if things cost more in that state.”
Herman (Tommy) Thompson Jr., a certified financial planner in Alpharetta, Georgia, agrees. “If a majority of the assets used to pay for living expenses come from tax-deferred accounts like IRAs and 401(k)s, state income tax rates could make the difference in which state is actually the most affordable.”
Affordability isn’t everything
While living within our means is essential, finding the most affordable place to live doesn’t make sense for everyone because some people are happier living with less, and Pennington says it really comes down to balance.
“When I’m working with clients who are planning on moving in retirement, I encourage them to think about cost of living, but they also want to make sure they’re picking a place where they can be happy,” she says. “I have clients who have retired with very little income in high-cost areas and those who need several million dollars to retire in a ‘lower’ cost-of-living area because of their individual spending goals.”
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Sources:
- GoBankingRates: “How Much a Comfortable Retirement Will Cost You in Each State”
- U.S. Bureau of Labor Statistics: “Consumer Expenditures”
- U.S. Department of Labor: “Top 10 Ways to Prepare for Retirement”
- Stephen Kates, certified financial planner and principal financial analyst for RetireGuide; email interview, Oct. 25, 2024
- Michelle Kruger, PhD, certified financial planner and director of financial planning at Gratus Capital; email interview, Oct. 24, 2024
- Tyler Meyer, certified financial planner and founder of Retire to Abundance; email interview, Oct. 23, 2024
- Elizabeth Pennington, certified financial planner with Fearless Finance; email interview, Oct. 25, 2024
- Herman (Tommy) Thompson Jr., certified financial planner with Innovative Financial Group; email interview, Oct. 23, 2024
