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Social Security replaces about 40% of your income during your working years.
A new report from FinanceBuzz aims to measure how widespread Social Security actually is in each state. And as it turns out, that 40% number isn’t that far off.
According to the personal finance site, Kansas has the most extensive Social Security, with average annual payments covering about 45% of seniors’ living expenses.
And Hawaii has the least guaranteed Social Security, with average annual payments covering only 21% of retirement benefits.
“We found that nationally, on average, they cover about 38% of their expenses,” said Josh Kebert, a FinanceBuzz researcher and author of the Dec. 23 report. “About half the country meets the 40% standard they are aiming for.”
The analysis found that in 24 states, Social Security benefits cover at least 40% of annual living costs.
Almost two-fifths of Americans move after retirement
According to the Transamerica Retirement Research Center, nearly two-fifths of Americans move into a new home when they retire. The goal is often miniaturization.
One way to save money in retirement is to find a state with a lower cost of living.
“Live and work somewhere where you can get paid well and make a big contribution, then move somewhere where retirement benefits are cheaper,” Koebert says.
Curiously, data on where retirees actually move does not show a large-scale migration to cheaper states. The top retirement destination in 2024 is Massachusetts, formerly known as Taxachusetts, according to an AARP report.
Other retirement destinations include Florida, Illinois, and Kentucky, all of which have relatively affordable costs of living.
Not surprisingly, the FinanceBuzz report found that states with relatively high costs of living, such as Hawaii, Massachusetts, and California, have less stringent Social Security checks.
This analysis calculates retirement benefits based on the Department of Labor’s Consumer Expenditure Survey. Social Security data is obtained from the Social Security Administration.
Social Security is the most advanced in these states
The 10 states with the most advanced Social Security are:
- Kansas. Annual retirement benefit: $54,961. Average annual Social Security payment: $24,603. Annual costs covered by Social Security: 44.8%.
- Oklahoma. Annual expenses: $52,179. Social Security payments: $23,020. Social Security covers 44.1% of expenditures.
- Indiana. Annual expenses: $56,012. Social Security payments: $24,388. Social Security covers 43.5%.
- Minnesota. Annual expenses: $58,238. Social Security payments: $25,065. Social Security covers 43%.
- Iowa. Annual expenses: $55,827. Social Security payments: $23,867. Social Security covers 42.8%.
- Nebraska. Annual expenses: $56,630. Social Security payments: $24,053. Social Security covers 42.5%.
- Alabama. Annual expenses: $54,343. Social Security payments: $22,962. Social Security covers 42.3%.
- Missouri. Annual expenses: $55,023. Social Security payments: $23,235. Social Security covers 42.2%.
- Michigan. Annual expenses: $58,547. Social Security payments: $24,705. Social Security covers 42.2%.
- Tennessee. Annual expenses: $55,827. Social Security payments: $23,458. Social Security covers 42%.
These states have the weakest social security.
And the 10 states with the least Social Security coverage are:
- Hawaii. Annual retirement cost: $111,097. Average Social Security payment: $23,634. Expenses covered by Social Security: 21.3%.
- Massachusetts. Annual retirement benefit: $93,230. Average Social Security payment: $24,742. Expenses covered by Social Security: 26.5%.
- California. Annual retirement benefit: $84,513. Average Social Security payment: $22,861. Expenses covered by Social Security: 27.1%.
- District of Columbia. Annual retirement benefit: $83,585. Average Social Security payment: $23,865. Expenses covered by Social Security: 28.6%.
- Alaska. Annual retirement benefit: $78,949. Average Social Security payment: $22,858. Expenses covered by Social Security: 29%.
- new york. Annual retirement benefit: $78,269. Average Social Security payment: $23,880. Expenses covered by Social Security: 30.5%.
- Maine. Annual retirement benefit: $70,602. Average Social Security payment: $22,554. Expenses covered by Social Security: 31.9%.
- Montana. Annual retirement cost: $67,882. Average Social Security payment: $22,624. Expenses covered by Social Security: 33.3%.
- Oregon. Annual retirement benefit: $69,119. Average Social Security payment: $23,800. Expenses covered by Social Security: 34.4%.
- Vermont. Annual retirement benefit: $70,293. Average Social Security payment: $24,346. Expenses covered by Social Security: 34.6%.
Retire where you want to spend your time
States with low Social Security coverage generally have a high cost of living. Some areas, like Alaska and Hawaii, are relatively remote.
States with more advanced social security tend to have a mix of urban centers and “huge rural areas” with lower costs of living, Koebert said.
Matthew Spiegel, a finance professor at Yale University, said cost of living aside, retirees need to consider where they actually want to spend their retirement years before deciding to move.
“Rural housing in Florida is cheaper than in Manhattan,” Spiegel said in the report. “But if our hypothetical retiree wanted to go to Broadway shows or Knicks games on a regular basis, frequent flights from rural Florida to Manhattan would quickly become expensive in terms of time and money. Nowadays, that rural home doesn’t come cheap.”
