The Best American Cities for an Affordable Retirement
Most Americans believe the U.S. is facing a retirement crisis, and that’s reflected in their retirement account balances. More than six in 10 Americans report that they’re not on track for retirement, and one quarter have nothing stashed away for retirement at all, according to the Federal Reserve. Part of the problem is that many Americans underestimate their retirement needs, and more than half have no clue how much they’ll need to retire comfortably.
So, how much do Americans need to retire? A general rule of thumb is that workers should aim to save 70% of their pre-tax income for each year of retirement. You can also estimate how much you’ll need to save by calculating how much savings you’ll need to support your lifestyle each year in retirement and multiplying that number by 25. Remember that you’ll receive Social Security benefits as well, so factor that amount into your calculation.
While these numbers can provide an estimate, the exact amount you’ll need to retire comfortably depends on many factors within and outside of your control. You may want to retire early, or you may be forced into early retirement. You might decide that you can live a more frugal lifestyle in retirement, or you might want more spending money in your retirement years. There’s also no telling how long you’ll live or what unexpected costs will arise. And finally, the amount you’ll need depends on where you plan to retire, since the cost-of-living varies greatly from one U.S. city to the next. One study that looked at average expenses for seniors found that while $1 million would get you through 25 years of retirement in Columbus, OH, the same amount would only last 10 years in Manhattan.
U.S. Cities with the Lowest Cost-of-Living
The Council for Community and Economic Research releases the Cost-of-Living Index (COLI) each quarter, which attempts to measure the cost of goods and services in each city, excluding taxes. The composite index includes data about the costs of each of the following categories:
With that in mind, here are the cheapest U.S. cities in general.
- McAllen, TX
- Harlingen, TX
- Kalamazoo, MI
- Muskogee, OK
- Richmond, IN
- Joplin, MO
- Pittsburg, KS
- Tupelo, MS
- Amarillo, TX
- Statesboro-Bulloch County, GA
Tax-Friendly States for Retirees
Another factor to consider is the tax rate on your Social Security benefits and pension income. The following states don’t charge taxes on either. However, consider sales and real estate taxes when making the best choice for you.
|State||Median real estate tax||Sales tax rate|
States with Low Assisted-Living Costs
You might consider a different location for your early retirement than your old age. That’s because assisted living costs vary widely by state, impacting how far you can stretch your retirement fund. Here are the states with the lowest assisted living costs.
|North Carolina/South Carolina||$3,000|
Best Cities for Retirement
Saving money on living costs means your retirement fund will stretch further, especially if you sell a house in an expensive city and move somewhere affordable. But you also want to enjoy your retirement, and if you’re used to creature comforts that won’t be available to you in your new city, you could face disappointment.
A recent U.S. News analysis looked at housing affordability in the largest metropolitan areas and also factored in happiness, taxes, the job market, access to healthcare, and desirability to determine the top places for Americans to retire. Here were the top 10 results.
|City||Median monthly mortgage||Median monthly |
|Fort Myers, FL||$1,416||$1,093|
|Port St. Lucie, FL||$1,436||$1,126|
|Ann Arbor, MI||$1,737||$1,083|
Additional cities worth looking into:
- Myrtle Beach, SC
- Nashville, TN
- Jacksonville, FL
- Manchester, NH
- Daytona Beach, FL
- Orlando, FL
- Dallas-Fort Worth, TX
- Lakeland, FL
- Chattanooga, TN
- Tampa, FL
- Grand Rapids, MI
- Houston, TX
- Charlotte, NC
- San Antonio, TX
- Pensacola, FL