As you may already know, Social Security is our nation's most important social program. Each month, more than 64 million benefit payments are sent out to eligible recipients, many of whom are senior citizens. Of these eligible beneficiaries, over 22 million are pulled out of poverty as a direct result of this guaranteed payout.

But what you might not realize is just how small your Social Security payout will actually be. According to the Social Security Administration, the average retired workers will see the program replace only 40% of their working wages. In other words, it's not meant to be relied upon as a primary source of income. But it's being leaned on as a major income source by many current retirees.

A senior counting a fanned pile of cash in his hands.

Image source: Getty Images.

These cities will allow you to stretch your Social Security income

Although there are a number of factors that bear significance in determining what you'll take home from Social Security (including your earnings history, work history, full retirement age, and claiming age), the city you call home can also favorably or unfavorably affect your finances. According to Kiplinger, the following 10 cities all offer a cost of living that, at minimum, is 16.4% below the national average. 

  1. Harlingen, Texas (24.2% below the national average)
  2. McAllen, Texas (22.6% below)
  3. Kalamazoo, Michigan (20.4% below)
  4. Memphis, Tennessee (19.4% below)
  5. Knoxville, Tennessee (18.3% below)
  6. Conway, Arkansas (18.1% below)
  7. Wichita Falls, Texas (17.7% below)
  8. Joplin, Missouri (17.7% below)
  9. Sherman, Texas (16.6% below)
  10. Hattiesburg, Mississippi (16.4% below)

One very simple reason these 10 cities offer a considerably lower cost of living is that their median household incomes are well below the national average.

In general, core expenditures, such as housing or rental costs, are derived from a combination of median earnings for taxpayers of a city, as well as economic opportunity for those workers. For retired workers receiving a Social Security benefit, economic opportunity isn't nearly as important as housing or rental affordability. In every instance above, these cities come in well below the median U.S. household income of $57,562 and a median U.S. home value of $193,500. In fact, Harlingen, Kalamazoo, Memphis, and Conway all have median home values that are near or below half of the national average.

A Social Security card wedged between tax forms.

Image source: Getty Images.

Affordability shouldn't be the only factor

But it should be noted that affordability, while arguably important for the 62% of retired workers currently generating at least 50% of their monthly income from Social Security, isn't the only consideration to be made.

For example, in addition to the federal government taxing a portion of Social Security benefits for individuals and couples earning over select income thresholds, 13 states also tax Social Security benefits to some varied degree.

Of the 10 cities represented above, residents choosing Joplin could be in for a surprise: Missouri is one of the 13 states to tax Social Security benefits, albeit it has some of the most generous exemptions of this group. In Missouri, individuals will need more than $85,000 in adjusted gross income (AGI) and couples will need over $100,000 in AGI before owing state tax on their benefits. Nevertheless, the point is that certain lower-cost states, such as Nebraska, Kansas, and Missouri, do have applicable taxes on Social Security benefits, and that could mean seniors keep less of their income.

Other factors to consider here are the intangibles beyond just cost. Moving to more affordable cities might mean moving away from family or friends. It could also mean moving toward more dangerous parts of the country. For instance, a couple of these cities have been hit by large tornadoes within the past two decades.

A senior tightly grasping his piggy bank as outstretched hands reach for it.

Image source: Getty Images.

Retired workers also have to realize that, no matter where they choose to call home, the purchasing power of their Social Security income is bound to decline over time. That's because the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is geared to track the spending habits of (you guessed it) urban and clerical workers. These workers aren't usually seniors, and they aren't collecting a Social Security benefit, meaning the costs that matter most to seniors aren't being properly factored into the cost-of-living adjustment. As a result, they are liable to see their purchasing power decline over time, no matter where they live.

According to The Senior Citizens League, the purchasing power of Social Security dollars has declined by 18% over the past decade for seniors, and fallen 33% since 2000.

Moving to a city with a low cost of living can help your Social Security dollars go further, but there are other factors that will need plenty of consideration as well.