Many people look forward to retirement as a time to relax and enjoy the things they couldn’t do during their working years. In order to live your retirement to the fullest, though, it helps to do some planning. A good place to start is by estimating how much you’ll be spending, because it helps ensure that you can afford the lifestyle you want.
Our study found that retirees spend less overall than younger generations. However, seniors do spend their money differently. For example, people who are 65 and older spend 14% more on health care than people age 45 to 54. Having an idea of what you’ll spend on, in addition to estimating how much you’ll spend, can go a long way.
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Comparing the cost of living
Where you choose to retire will also directly affect how far your dollars go. Prices for goods and services can vary greatly. In New York, the third least affordable state for retirement, rents alone are about 30% higher than the national average, while rents in Alabama, the third most affordable state for retirement, are nearly 40% below the national average.
To help with your retirement planning, the average cost for a 20-year retirement that starts at age 65, the age when you can start receiving Medicare and near-max Social Security benefits. According to the CDC, if you reach 65, you can expect to live an average of about 20 more years. (Life insurance is as important as ever for seniors. Here are the best life insurance companies for those 65 and older.)
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The 10 least affordable states for retirement
Overall, the cost of a 20-year retirement ranges from $840,846 in the least expensive state to $1,162,663 in the most expensive. In the 14 most expensive states, retirement will cost you at least $1 million over 20 years.
Outside of Hawaii, all 10 of the most expensive states are along either the East or West Coast. In particular, five of the top 10 are in the Northeast.
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10. New Hampshire
Cost of 20-year retirement: $1,038,057
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9. Washington
Cost of 20-year retirement: $1,043,944
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8. Massachusetts
Cost of 20-year retirement: $1,058,661
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7. Connecticut
Cost of 20-year retirement: $1,059,642
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6. Maryland
Cost of 20-year retirement: $1,073,378
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5. New Jersey
Cost of 20-year retirement: $1,107,718
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4. California
Cost of 20-year retirement: $1,126,360
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3. New York
Cost of 20-year retirement: $1,136,172
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2. District of Columbia
Cost of 20-year retirement: $1,146,964
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1. Hawaii
Cost of 20-year retirement: $1,162,663
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The 10 most affordable states for retirement
On the flip side, the South is the least expensive region for retirement. The five most affordable states for retirement are all in the Southern United States.
The Midwest as a whole is also a relatively affordable retirement option. The 21 least expensive states are all in either the South or Midwest. (If you’re looking to build an environmentally conscious career before retirement, the Midwest has the best states for green jobs.)
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10. Nebraska
Cost of 20-year retirement: $879,110
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9. Missouri
Cost of 20-year retirement: $878,129
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8. Oklahoma
Cost of 20-year retirement: $873,224
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7. Ohio
Cost of 20-year retirement: $872,242
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6. South Dakota
Cost of 20-year retirement: $865,374
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5. Kentucky
Cost of 20-year retirement: $862,431
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4. West Virginia
Cost of 20-year retirement: $853,601
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3. Alabama
Cost of 20-year retirement: $850,657
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2. Arkansas
Cost of 20-year retirement: $848,695
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1. Mississippi
Cost of 20-year retirement: $840,846
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How much the average retirement costs nationally
If you retire at age 65, you can expect to spend about $981,150 over the course of a 20-year retirement. This figure is based on national spending data from the BLS. Looking at annual spending, individuals age 65 to 74 spend an average of $55,611 per year, while those aged 75 and older spend an average of $42,504 per year. Costs may vary a lot even within a state.
Estimating the cost of retirement in a nearby metro area will give you get a better idea of how much you can expect to spend wherever you retire. These estimates can help you decide if you want to spend more of your retirement savings to live near a major city or whether you’re better off moving somewhere more affordable to enjoy more peace and quiet. (Here’s how to avoid going broke in retirement.)
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4 tips to boost your retirement savings
1. Start investing.
The only way to boost your savings enough for you to enjoy a comfortable retirement is to invest. Thankfully, investing isn’t difficult. There are many apps and services that will handle all the hard work of managing your investments. To get you started, try this list of this year’s best investing apps.
2. Take advantage of employer retirement plans.
If you have access to a 401(k) plan through your employer, contribute to it. The beauty of a 401(k) is that you can contribute pretax money, which means your contributions go into the account before payroll taxes come out. The money then grows tax-free, and you may actually lower your income bill for the year. A traditional IRA or Roth IRA may also be a good option.
3. Get the most out of your savings account.
A savings account with a high interest rate will help you earn more interest over your lifetime. It will also help you maximize your savings during your retirement.
4. Focus on interest rates.
A high-yield savings account with an interest rate of 2% will earn interest significantly faster than an account with an interest rate of 0.01% (what most big banks offer). Certificates of deposit (CDs) may even offer rates above 3%. Here’s a guide to the types of savings accounts. See how fast your savings will grow with this free savings calculator.
This article originally appeared on Policygenius and was syndicated by MediaFeed.org.
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