Inflation is driving the cost of living up rapidly these days, but it's pretty much always a concern, especially for retirees on a fixed income.
Moving to a more affordable area is one way to stretch your savings further if you're not too attached to your current home. You might really want to think about it if you live in one of the 10 states listed below.
These 10 states have the highest cost of living
The following 10 states have the highest cost of living as of the first quarter of 2022, according to the Missouri Economic Research and Information Center. Each is shown alongside its index score, with the national average being 100. A higher number indicates a more expensive state. For example, an index score of 110 means a place is 10% more expensive than the national average.
- Hawaii (192.7)
- New York (152.1)
- California (139.7)
- Massachusetts (130.2)
- Alaska (127.3)
- Maryland (126.4)
- Oregon (125.2)
- Connecticut (118.9)
- New Hampshire (117.4)
- Vermont (116.9)
The District of Columbia is also pretty expensive. Its index score of 158.8 was second only to Hawaii.
It's worth noting these are averages for the entire state. It's possible that some areas of these states are not that much more expensive to live in than the national average. It's also possible that some areas have an even higher cost of living than these averages suggest.
So what does this mean for you?
If you don't plan to live or retire in one of these states, you might be able to save less for retirement, but this isn't a guarantee. Likewise, retiring in one of these expensive states might not cost as much as you fear. But regardless, it's important to have a realistic idea about how much your basic retirement expenses will cost.
Those who plan to retire in their current city probably already have a good idea about average costs in the area. But if you plan to retire elsewhere, you need to get a sense of how much everyday expenses, like food, housing, and healthcare, stack up in your retirement destination compared to your current residence. Make sure you're basing your estimated retirement expenses around the costs where you plan to spend retirement.
Prioritize your retirement savings right now, too. You might feel that you have plenty of time left to save, but the longer you put off saving for retirement, the more difficult your task becomes. Once you have an idea of how much you plan to spend every year in retirement, it shouldn't be too tough to figure out how much you need to save.
What if I don't want to move?
If you're worried about retirement costs but you don't want to move, there are other things you can do to keep costs down. You could consider moving to a more affordable area within your state or downsizing your home. However, downsizing may not save you much money if housing costs have risen significantly in your area since you purchased your home.
You might also be able to reduce costs in retirement by shopping around before you buy things, relying upon senior discounts where you can find them, and devising a monthly budget and some sort of tracking system to hold yourself accountable.
Everyone's retirement looks different, so it's tough to say exactly what will work best for you. Be open and consider all your options. And don't wait until you're ready to retire before you begin thinking seriously about all of this. The sooner you begin planning, the better chance you have of retiring comfortably.