Increased costs make people worried about leaving
A survey by AARP shows that retirees are worried that they cannot afford to buy a retirement.
Fox-10 Phoenix
One of the most popular items in retirement surveys is the “magic number.” In addition to Social Security benefits, the savings you need to save for a comfortable retirement.
Charles Schwab recently estimated his magic number at $1.8 million based on a poll of participants in his retirement plan. The Schroders survey was $1.2 million. Northwestern Mutual split the difference for $1.5 million.
An August 1 analysis from a personal finance site shows Gobankingrates uses $1.5 million as the basis for its retirement exercise. The report looks at how long the money lasts for all state retirees.
“Many Americans come with the fact that $1 million doesn’t guarantee a comfortable retirement in parts of the United States,” says CJ Williamson, a researcher at Gobankingrates. “The goal of this particular analysis was to take it a step further and clarify whether an even greater savings of $1.5 million would be enough to last 25 or 30 years of retirement in all 50 states.”
The report calculates annual living expenses in each state after deducting Social Security income to determine the period in which $1.5 million in savings retired.
The following is the duration of $1.5 million in a popular retirement state
For the outcome, let’s start with some of the most popular retirement countries. And before doing that, let’s look at the latest data on where Americans are retiring.
These are the top five destinations for Americans who moved specifically for retirement in 2024, followed by Florida, Illinois, Kentucky and North Carolina, according to a March report from AARP, sourced from the Moving-Services Marketplace. Famous retirement destination Arizona did not win the top 10.
Now, retirees: If that’s where you’re moving, here’s the period when your $1.5 million could last in each location:
- Massachusetts: 23 years. After Social Security, the annual cost of living is $65,117, making Massachusetts the second most expensive state for retirees.
- Florida: 39 years. Florida retirees face an annual fee of $38,379 after Social Security, placing them the 34th among the states for affordability.
- Illinois: 44 years. Illinois ranks 26th in affordable prices, with an annual living cost of $34,233.
- Kentucky: 46 years. The annual cost is $32,670, and Kentucky ranks 17 for retirement affordability.
- North Carolina: 42 years. North Carolina ranks 27th in affordable prices, costing $35,495 per year.
Most of us haven’t saved $1.5 million for retirement
Pause now for a reality check.
Most Americans retire with a savings of $1.5 million. A typical senior with a retirement account saves about $200,000, according to data from households aged 65-74 from the 2022 Consumer Financial Survey. Only about half of those households report having a retirement account.
Many American retirees live primarily in Social Security, and a considerable number of Americans seem to do well.
The concept of magic numbers arises from the idea that federal benefits are not intended to cover the entire cost of retirement, and therefore should save ten times the annual salary for retirement to supplement Social Security income.
According to Gobankingrates, there is some good news. If you save $1.5 million, money will last very long in most states.
This is the 5 most affordable retirement countries
If you’re looking for value, here are five most affordable states for retirees: in West Virginia, $1.5 million will last 54 years. Kansas (52), Mississippi (51), Oklahoma (51), and Alabama (50).
These numbers should give the average retiree comfort. Americans who retire at age 65 can expect to give or take about 20 years, based on longevity data.
Even if you retire early and live in 100, it is unlikely that you will need to save retirement for over 40 years. And $1.5 million will last for 40 years in 32 states, according to an analysis by Gobankingrates.
“We often see comments online claiming that $1.5 million is not enough to retire, but in reality, the data shows that it can go a long way in almost every state,” says Spenser Liszt, a certified financial planner in Dallas.
“The bigger problem is that many people think they need to be very wealthy to retire comfortably,” he said. “That belief can lead to unnecessary stress. It feels like there’s too much investment risk, overworked, or always behind.”
This is the most expensive retirement situation
However, some states are eye-openingly expensive for retirees. See Massachusetts above. Here’s how long $1.5 million lasts in the other four most expensive states:
- Hawaii: 17 years. The annual cost of living after Social Security is $87,770.
- California: 24 years. Annual living expenses: $63,795.
- New York and Alaska: 29 years. Annual cost of living: Approximately $51,000 in both states.
Katherine Vallega is a certified financial planner near Boston. Not surprisingly, she doesn’t think $1.5 million is Massachusetts’ magic number.
“In fact, I’m telling my New England clients now that I should shoot to save $3 million to $4 million for a comfortable retirement,” she said.
