Personal Finance

New York Life | November 18, 2021

The pandemic proved that many people really can work from anywhere and Americans are on the move – with up to 23 million US workers saying they intend to relocate to a different city or region, according to 2020 Harvard Business Review.

But it’s not just the opportunity to “work from anywhere” that makes people relocate. Some choose to move to lower-tax states when their children finish school. Many look to change location for their retirement – moving closer to nature because they no longer need to be near the city for work, moving closer to other family members, or relocating to states with a cheaper cost of living, to reduce their living expenses and make their money stretch further.

The average American retiring at age 65 is likely to enjoy nearly 20 years of retirement. Based on average annual spending for American seniors, this means they will spend about $987,000 during the course of their retirement.

Another commonly-cited rule of thumb is that you’ll need around 70 percent of your pre-retirement yearly salary to live comfortably once you say goodbye to work – and that’s based on having paid off your mortgage and being in excellent health.

However, managing your expenses by relocating to a different state or region could have a huge impact on the cost of your retirement. For example, in San Francisco the average rent on a two-bedroom apartment is $4,128; while in Tulsa it’s a mere $675.¹

So, where are the most cost-efficient states to relocate to for a cheaper cost of living in retirement?

According to research carried out recently by job advice company Zippia, the five cheapest states to retire to are:

1.    Mississippi

Mississippi welcomes retirees with open arms and low property taxes. The median cost of a home there is just $114,500; while the monthly cost of a Medicare Advantage Plan is $38.56; and the average annual cost of living is $46,084.

2.    Arkansas

Arkansas can also offer you an affordable retirement. The median cost of a home in the state is $123,300; the monthly cost of a Medicare Advantage Plan is $44.49; and the average annual cost of living is $44,571.

3.    Oklahoma

In Oklahoma, the median cost of a home in the state is $130,900; the monthly cost of a Medicare Advantage Plan is $48.49; and the average annual cost of living is $46,613.

4.   West Virginia

In West Virginia, the median cost of a home is $115,000; the monthly cost of a Medicare Advantage Plan is $59.75; and the average annual cost of living is $44,823.

5.    Indiana

Meanwhile, in Indiana, the median cost of a home is $135,400; the monthly cost of a Medicare Advantage Plan is $48.04; and the average annual cost of living is $46,838.

Of course, not everyone wants to relocate and, for those looking to stay where they are or even locate to a more expensive state  (Zippia’s research rates Hawaii, Colorado, Oregon, Washington and Massachusetts as the top five most costly) there are a number of steps you can take both now and as you begin retirement to ensure you stretch your money as far as possible.

Plan to reduce your fixed expenses

For many people, their largest expense is their mortgage. Consider downsizing to reduce mortgage and property tax costs. Smaller homes also mean lower costs for utilities and insurance.

Needs versus wants

Understand the difference between what you absolutely need to pay for – food, housing, healthcare – and more discretionary “wants”, such as vacations, cars, and eating out.

Consider maximizing social security

If you delay your retirement, your payment percentage can increase up to 8 percent annually, depending on year of birth.

Establish retirement income beyond your personal savings

Your savings will diminish no matter what, so look to create an ongoing source of income that will last for the rest of your life. Consider an income annuity as a reliable way to turn your personal assets into guaranteed lifetime income*.

Protect your assets

Keep your nest eggs safe from loss by protecting them with proper insurance, such as life insurance and other products.

Whether you’re considering moving to a different region for your retirement or simply looking to maximize the money you have when you pack up work for the last time, it’s clear there are plenty of benefits to planning now for the retirement you want.

*Guarantees are based upon the claims paying ability of the issuing insurance company.

¹“Our Work-from-Anywhere Future.” Harvard Business Review, December 2020. Accessed 3 November 2021.  https://hbr.org/2020/11/our-work-from-anywhere-future

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