It's no secret that retirement is expensive, and it's becoming more difficult for workers to prepare for it. Most retirees won't be able to survive on Social Security benefits alone, so that means you'll need a healthy nest egg to last through your golden years. However, the average baby boomer has just $152,000 in retirement savings, a report from the Transamerica Center for Retirement Studies found.
If you're nearing retirement and your savings are falling short, there are a couple of things you can do. First, you can work as hard as you can to save more in the years you have left before retirement. And second, you can figure out how to lower your costs in retirement so your money will go further.
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One of the biggest expenses you'll face year to year is your general cost of living. This includes everything from housing to utilities to groceries to transportation, and if you live in an expensive city, there might not be much you can do to lower these costs. But if you're willing to move when you retire, it might be worthwhile to move to one of these more affordable states so that your savings last as long as possible.
The most affordable states for retirees
Financial services website HowMuch.net analyzed data from the Bureau of Labor Statistics to determine how much it costs, on average, to retire in each state based on the general cost of living. According to this research, these are the five most affordable states to retire in, as well as how much retirement costs on average in that state:
1. Mississippi ($618,000)
2. Tennessee ($661,000)
3. Alabama ($713,000)
4. Oklahoma ($724,000)
5. Arkansas ($728,000)
On the other side of the coin, some of the most expensive states to retire in include California, New York, Oregon, Washington, and most states in the New England area -- retirement in all these states costs upward of $1 million.
Keep in mind that this data doesn't necessarily paint the full picture. Although these states are more affordable on average, exactly how much you can expect to spend will vary widely based on the individual city you choose. For example, although Mississippi is the most affordable state in the country to retire to, the median home value in the Jackson suburb of Madison is nearly $300,000. Meanwhile, the small town of Connell, Washington, boasts a median home value of just $169,000, despite the fact that Washington is one of the most expensive states for retirees.
In other words, while understanding which states are more affordable than others is a good place to start, you'll need to research the actual city you choose to move to if you want to make sure you're saving as much money as possible.
Also, housing and general cost of living aren't the only factors to consider when deciding whether it's worthwhile to move in retirement. For example, if you move across the country to a more affordable town, you might save a lot of money. But if you're taking trips back to your hometown every couple months to visit family and friends, you might not be saving as much as you think. That's why before you start browsing homes for sale in a new state, it's important to consider whether it's actually worth it to move in retirement.
The pros and cons of moving in retirement
One of the biggest advantages of moving during retirement is the money-saving aspect, especially if you currently live in an expensive city. If you sell your current home and move to a new city with a significantly lower cost of living, you could potentially save tens of thousands of dollars or more right off the bat. And if you're spending less per year just to make ends meet, that leaves more cash for you to spend enjoying travel, hobbies, and other fun retirement activities.
Another advantage of moving is that it can be an exciting new adventure. Retirement can be one of the most relaxing periods in your life, but relaxation can quickly turn into boredom if you get stuck in a rut doing the same things every day. Moving to a new city can spice up your retirement lifestyle, giving you a new reason to get out of the house, try new things, and make new friends.
That said, moving is a big decision that shouldn't be taken lightly, so make sure you've completely thought it through. When you have a prospective new city in mind, dig into your finances to see how living there will compare to the city you currently call home. Don't forget about how much it will cost to move, because hiring movers is expensive -- especially if you're moving far away. Also, think about the emotional aspects of moving. If you're going out of state, are you OK with leaving behind friends and family? How often will you be able to afford to make trips back to visit?
Once you know where you want to move and you've crunched the numbers to see how much you'd be saving, take a test run to make sure you'll actually enjoy living there. Spend a few weeks in your prospective new city, and think about whether you could see yourself living there. Do you feel safe? Is the community friendly and welcoming? Are there enough activities to keep you busy in retirement? Will your healthcare needs be met?
If you're on the fence about moving, see if you can find some middle ground between staying put and making a drastic move. You don't necessarily need to move across the country to save money. Perhaps instead, you might choose to move to a smaller, less expensive town not too far from where you currently live. That way, you could enjoy a lower cost of living without completely uprooting your entire life.
Moving in retirement can be an excellent way to lower your cost of living and make your savings last longer, but it's not necessarily the right choice for everyone. Before you make any big decisions, make sure you've done your homework and understand how moving will affect your retirement lifestyle -- both financially and emotionally. If moving ends up being the right choice for you, it could be one of the best retirement decisions you'll ever make.
