Whether you realize it or not, Social Security is probably this country's most important social program. According to an analysis from the Center on Budget and Policy Priorities (CBPP), the mere fact that retired workers have a guaranteed income stream from Social Security (should they earn enough lifetime work credits) pushes the federal poverty level for the elderly down to 8.8%. Without Social Security income, an estimated 40.5% of retired workers would be living below the poverty line.
In addition, data from the Social Security Administration (SSA) finds that more than three out of five retired workers leans on Social Security for at least half of their monthly income. For added context, the SSA suggests that the average retired worker should expect Social Security to replace about 40% of their wages. In other words, we're really relying on Social Security income to prop us up during retirement.
But Social Security income probably isn't making retirees feel rich. As of September, according to the SSA, the average retired worker was bringing home $1,372.39 a month, or about $16,468.68 a year. That may not sound like much, but in the right state a retired worker can make it, along with his or her nest egg, stretch pretty far.
Your Social Security dollar goes the furthest in these states
The following five states offer the lowest cost of living index, according to data gathered from the Missouri Economic Research and Information Center as of the third quarter of 2017. If seniors choose to live in these states, not only will they be choosing one of the 37 states that don't tax Social Security benefits, but their Social Security dollars will probably go a bit farther as well.
Based purely on aggregate cost of living, the cheapest place for a senior to retire is Mississippi, with a cost-of-living index of 84.2. In other words, with a baseline reading of 100, Mississippi is almost 16% cheaper. Median home prices in Mississippi are the cheapest in the country, with grocery, utility, transportation, and healthcare costs all coming in about 7% to 9% below the national average. I'm not saying the average American with a Social Security check will live like royalty in Mississippi, but there's no state in the U.S. where a Social Security dollar will go farther.
The home of the Razorbacks comes in second with a cost-of-living index of 87.7. The big help, once again, is relatively low housing costs. Arkansas' housing costs are more than 23% below the baseline, and the seventh lowest in the country. Transportation and healthcare costs are actually even more affordable than Mississippi, with Arkansas' transportation costs coming in the lowest of all 50 states. The closest thing to a knock against the state are its utility costs, which are only about 0.8% below the average. Nonetheless, it's a state to consider if you want to stretch your Social Security dollars.
Home to the Motor City, Michigan has the third lowest cost-of-living index at 89. Though transportation costs in Michigan are 3% higher than the national average, housing costs are well below the norm, with a reading of just 78. Just as notable, Michigan has the cheapest grocery costs in the country, with a reading of 90.4, or nearly 10% below the average. It rounds out with healthcare costs and utility costs that are a respective 6% and 8% below the baseline.
Missouri, the home state of the study, made the list in fourth place, with a cost-of-living index of 89.2. Yet again, housing played a big role in pushing down aggregate living costs, with Missouri's housing reading of 73.2 coming in as the third lowest in the country. As for the remaining categories, it does have lower transportation costs than most of the nation, but isn't notably cheaper when it grocery, healthcare, or utility expenses. However, since housing expenditures top the list for seniors, Missouri could well be worth a look.
The final state with a cost-of-living index below 90 is Oklahoma, at 89.3. The home of the Sooners has the fourth lowest housing costs in the country and the second lowest transportation costs, and it's below the national baseline in every single category. That includes grocery costs, which check in almost 6% below the average.
But keep in mind that not everything is about location, location, location. When you file for benefits can be even more important than where you choose to live. Because your benefits grow at approximately 8% for each year you go without enrolling, beginning at age 62 and ending at age 70, you have the opportunity to really beef up your monthly take-home almost regardless of where you choose to live by simply waiting a few years to sign up.