When it’s time to retire, there’s a definite decision to be made based on how much money you’re going to have available per month to spend for the next, say, 25 to 30 years (or more, depending on how long your family is). And, in the United States, saving money for retirement has always been a headache, especially with inflation like the one we had a couple of years ago, which was dangerously close to 9%, an unprecedented number in several decades.
Although the cost of living adjustments of the Social Security Administration (SSA) accompanies inflation, so that retirees and other beneficiaries do not lose purchasing power, it is sometimes difficult to make ends meet, mainly for those who live in the most expensive states to retire, such as New York, New Jersey, Vermont, Massachusetts, to mention a few.
We’ve Found the Most Affordable States in the USA for Retirement
Because retirees’ savings have shrunk in recent decades, with average reductions in savings funds of 37%, according to The Goldman Sachs Group, Inc. (NYSE: GS), it’s time to start thinking about where you’re going to live in a couple of decades, when you reach your full retirement age (FRA). Despite the difficulties in saving, some lucky few have managed to amass a small fortune of $1 million or more in their 401(k) plan, with an uptick of 20% compared to a measurement made at the end of 2023, according to Fidelity Investments.
In the ranking prepared by Insider Monkey, a web portal that has a special section on cost of living analysis (as well as the best investment ideas of hedge funds and insiders), it found that these are the three best states to retire, due to their quality of life, affordability and good services available to older adults.
The third place is for the state of Kansas, which with a MI retiree affordability index of 1.12, and an average Social Security payment of $1,887.08, offers a cost of living index of 87.1, and an adjusted cost of living of $2,603. Such a cost of living is 12.9% lower than the national average, which implies that the state is quite adjustable to the lifestyle and basic expenses of a retiree or a retired couple.
Tax-wise, consider that Kansas collects taxes on retirement payments, but has an AGI of $75,000: fortunately, most retirees don’t reach that threshold. And if you want to work, the average hourly earnings is $29.87.
Michigan is ranked #2 on our list of the best states financially to retire in the U.S. USA. According to the IM Retiree Affordability Index, it has a score of 1.12, pretty good, huh? Well, also the average hourly income is $32.20 and the average Social Security payment is $1,917.53. After taxes, the estimated total income is $3,040. The cost of living index in Michigan is 90.6, which means that the adjusted cost of living is $2,718, 9.4% lower than the national average. For an average retiree working part-time, this translates to an average net income of $3,040 after receiving Social Security benefits.
The Best State for Retirement in 2024: Affordability and Nice Quality of Life
Listed at No. 1 on Insider Monkey’s list is the state of Minnesota, the best financially for retirees looking to make as much as possible out of their Social Security check. It has a MI Retiree Affordability Index of 1.14, and the average worker’s earnings are $36.99 per hour.
The rest of the numbers are pretty positive too: the average Social Security payment of $1,902.69. After taxes, the estimated total income reaches $3,219. The cost of living index is 94.1, which translates into an adjusted cost of living of $2,823.
Although Minnesota taxes Social Security in 2024, most retirees do not reach enough income for their benefits to be taxed. Starting in tax year 2023, seniors with taxable income up to $78,000, or $100,000 for a couple, are exempt from paying state taxes on their benefits.
