As the golden years near, many become hyper-focused on how big a nest egg they need to retire. Not surprisingly, the size hinges largely on where that nest is needed, as the cost of housing and other living expenses vary widely by locale.
Our latest LendingTree study calculates how much people need to retire in each U.S. metro using different methods: based on the amount retirees spend in a year and on the median annual earnings of people ages 55 to 64.
We found that it takes more than $1 million to retire with an average lifestyle in nearly 40% of the 384 U.S. metros based on the former assessment, but significantly less on the latter assessment. (By significantly, we mean just one metro.)
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Key findings
- You need more than $1 million to retire with an average lifestyle in 147 of the 384 U.S. metros. Nationally, retirees would need an average nest egg of $1,071,127. A retiree in San Francisco needs a nest egg of $1,365,870 on average — the highest total across the U.S.
- 12 of the 20 metros that require the biggest nest eggs for retirees are in California. San Diego ($1,298,796) and San Jose ($1,276,997) join San Francisco in the top five.
- You can retire with an average lifestyle for less than $800,000 in just one metro: Johnstown, Pa. The Pennsylvania metro slides just under that mark at $779,765. Cumberland, Md. ($802,988), and Danville, Ill. ($804,301), are closest.
- Locals may need far less to maintain their incomes near retirement age once they collect Social Security. If you focus on the median income of near-retirement-age workers rather than average spending by retirees, residents in just one metro would require more than $1 million to retire — San Francisco. Nationwide, the average nest egg needed under this calculation is $768,742.
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20. Kahului, Hawaii
Metro Average spend: $59,927
Implied pretax need: $73,111
Average Social Security retirement income: $24,780
Income needed from additional retirement funds: $48,331
Nest egg: $1,208,274
Image Credit: ideatrendz .
19. Vallejo, California
Metro Average spend: $59,597
Implied pretax need: $72,709
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $48,598
Nest egg: $1,214,953
Image Credit: BackyardProduction / istockphoto.
18. Seattle
Metro Average spend: $61,576
Implied pretax need: $75,123
Average Social Security retirement income: $26,259
Income needed from additional retirement funds: $48,864
Nest egg: $1,221,602
Image Credit: Sean Pavone/ istockphoto.
17. Santa Cruz, California
Metro Average spend: $60,147
Implied pretax need: $73,379
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $49,269
Nest egg: $1,231,721
Image Credit: photoquest7 / Wiki Commons.
16. San Luis Obispo, California
Metro Average spend: $60,202
Implied pretax need: $73,446
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $49,336
Nest egg: $1,233,398
Image Credit: Nature, food, landscape, travel / iStock.
15. Santa Rosa, California
Metro Average spend: $60,367
Implied pretax need: $73,648
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $49,537
Nest egg: $1,238,429
Image Credit: Bob Corson / istockphoto.
14. Santa Maria, California
Metro Average spend: $60,477
Implied pretax need: $73,782
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $49,671
Nest egg: $1,241,783
Image Credit: JulieHewitt / iStock.
13. Denver
Metro Average spend: $58,992
Implied pretax need: $75,245
Average Social Security retirement income: $25,504
Income needed from additional retirement funds: $49,741
Nest egg: $1,243,532
Image Credit: istockphoto.
12. Washington, DC
Metro Average spend: $61,302
Implied pretax need: $74,788
Average Social Security retirement income: $24,809
Income needed from additional retirement funds: $49,979
Nest egg: $1,249,478
Image Credit: Sean Pavone.
11. Salinas, California
Metro Average spend: $60,862
Implied pretax need: $74,251
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $50,141
Nest egg: $1,253,521
Image Credit: rightdx / iStock.
10. Poughkeepsie, New York
Metro Average spend: $61,522
Implied pretax need: $75,056
Average Social Security retirement income: $24,847
Income needed from additional retirement funds: $50,209
Nest egg: $1,255,220
Image Credit: Elisank79 / iStock.
9. Miami
Metro Average spend: $60,477
Implied pretax need: $73,782
Average Social Security retirement income: $23,410
Income needed from additional retirement funds: $50,372
Nest egg: $1,259,300
Image Credit: Gabriele Maltinti / istockphoto.
8. Oxnard, California
Metro Average spend: $61,247
Implied pretax need: $74,721
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $50,610
Nest egg: $1,265,25
Image Credit: DepositPhotos.com.
7. Napa, California
Metro Average spend: $61,247
Implied pretax need: $74,721
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $50,610
Nest egg: $1,265,259
Image Credit: Latypova / iStock.
6. Los Angeles
Metro Average spend: $61,522
Implied pretax need: $75,056
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $50,946
Nest egg: $1,273,643
Image Credit: DepositPhotos.com.
5. San Jose, California
Metro Average spend: $61,631
Implied pretax need: $75,190
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $51,080
Nest egg: $1,276,997
Image Credit: istockphoto/GerardoBrucker.
4. Honolulu
Metro Average spend: $62,566
Implied pretax need: $76,331
Average Social Security retirement income: $24,780
Income needed from additional retirement funds: $51,551
Nest egg: $1,288,763
Image Credit: Depositphotos.com.
3. San Diego, California
Metro Average spend: $62,346
Implied pretax need: $76,062
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $51,952
Nest egg: $1,298,796
Image Credit: DepositPhotos.com.
2. New York
Metro Average spend: $63,501
Implied pretax need: $77,471
Average Social Security retirement income: $24,847
Income needed from additional retirement funds: $52,623
Nest egg: $1,315,587
Image Credit: DepositPhotos.com.
1. San Francisco
Metro Average spend: $64,545
Implied pretax need: $78,745
Average Social Security retirement income: $24,111
Income needed from additional retirement funds: $54,635
Nest egg: $1,365,870
Image Credit: Depositphotos.
Methodology
To calculate the amount of retirement assets required to retire in each metropolitan statistical area (MSA), LendingTree analysts performed two separate calculations.
The first took the estimated annual expenditures of retirees in each MSA and calculated the pretax amount. We then subtracted the average annualized Social Security retirement benefit for each state to determine the remaining income retirees would need, on average, to maintain that level of spending. Average Social Security benefits were calculated as the averages the Social Security Administration reported for 2021 (the latest available), plus the cost-of-living adjustments for 2022 and 2023. We then divided that amount by 4% to apply the “4% rule” to calculate the necessary assets required to meet the average spending level.
For the second, we subtracted each state’s average Social Security benefit from the estimated median earnings for full-time workers ages 55 to 64 and then applied the 4% rule.
Analysts estimated the average annual spending of retirees in the U.S.’s 384 metros by multiplying the average annual expenditures of retirees from the U.S. Bureau of Labor Statistics’ (BLS) 2021 Consumer Expenditure Survey (the latest available) by the U.S. Bureau of Economic Analysis’ (BEA) 2020 Regional Price Parity (the latest available) for each metro. This was further multiplied by the year-over-year change in the BLS’ consumer price index between October 2021 and October 2022 to more accurately show the growth in inflation.
Median annual earnings of full-time workers ages 55 to 64 were estimated by multiplying the median earnings of all full-time workers in each metro from the U.S. Census Bureau 2021 American Community Survey (the latest available) by the ratio of annualized median weekly wages of full-time workers ages 55 to 64 in the third quarter of 2022 to the annualized median weekly wages of all full-time workers in the third quarter of 2020 from the BLS.
We were conservative in our tax assessment by assuming a federal tax rate of 22%, as the target income levels in every metro fell within that bracket (and the relevant tax rate for that bracket within each state’s tax scheme), unless that state was reported as not taxing Social Security retirement income in 2022. For metros that cross state lines, we applied the rate of the first state of the metro name — where more people reside. We note that not all retirement income is taxed under income rules and that individuals and families may be eligible for additional credits and deductions.
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This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.
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