A recent analysis explores how long $1.5 million in retirement savings can last across the United States, with significant variations based on location.
A survey by Northwestern Mutual involving over 4,500 Americans reveals that $1.5 million is often seen as the ideal amount for retirement savings. However, the duration it can sustain a retiree vastly differs among states. For instance, in Hawaii, this sum might support a retirement lifestyle for merely 17 years. On the other hand, in West Virginia, the same amount could stretch to cover 54 years, marking it as the state where retirement savings last the longest.
The analysis conducted by GOBankingRates utilizes data from the Bureau of Labor Statistics’ 2023 Consumer Expenditure Survey. This survey details retirees’ annual spending on essential items such as groceries, housing, utilities, transportation, and healthcare. The study adjusts these figures using the Missouri Economic Research and Information Center’s cost-of-living index to reflect local economic conditions better. Through this approach, the analysis offers a nuanced view of retirement affordability beyond the mere basics.
States with high housing costs, like California, New York, and Massachusetts, emerge as some of the priciest retirement destinations. In California, $1.5 million might span just 24 years, given the high annual costs after accounting for Social Security. Similarly, in states such as New York and Hawaii, retirees face significant financial challenges due to elevated living expenses.
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Conversely, in more affordable states like Alabama, Arkansas, and Mississippi, retirement savings can last much longer. For instance, Arkansas and Alabama offer the potential to stretch $1.5 million over 49 to 50 years, respectively. Importantly, West Virginia stands out as the most economical state for retirees, with the potential to stretch their savings over 54 years owing to the lowest annual expenses.
Annual costs and the number of years $1.5 million will last after Social Security are as follows for several states: Alabama ($30,207, 50 years), Alaska ($50,997, 29 years), Arizona ($44,628, 34 years), Arkansas ($30,327, 49 years), and California ($63,795, 24 years). This pattern continues with states having varying costs and longevity of savings.
This disparity in retirement affordability highlights the importance of considering location in financial planning. States not only differ in housing costs but also utilities and healthcare, contributing to the overall retirement budget.
Retirement strategies should incorporate geographical economic factors as the longevity of $1.5 million in savings can significantly differ from one state to another.
