In the sun-soaked state of Hawaii, one year of retirement could cost you more than $52,000. If you chose to spend your golden years somewhere like Arkansas, on the other hand, your reserve fund might stretch further: The typical annual cost of retirement there is just $29,700.
The Aloha State has a high cost of living, making it a very expensive place to settle down. Just one month of housing, for example, could cost almost $2,500. Meanwhile in Arkansas, one of America's least expensive states, a month of housing can cost less than $1,100, according to MagnifyMoney.
Using data from the U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, and MedicareAdvantage.com, researchers determined how much money adults ages 65 and older spend each year on food, housing, transportation, entertainment, and personal care. They then weighed that number against the typical costs of goods in each state.
Based on that analysis, these are the top five most expensive U.S. states in which to retire:
Yearly costs in retirement: $52,511
Yearly costs in retirement: $51,084
Yearly costs in retirement: $50,976
Yearly costs in retirement: $48,950
Yearly costs in retirement: $48,127
While Hawaii lands the top spot for expensive places to retire, it's not a surprise that California, New Jersey, and New York rank high on the list, too. Each one of those states has its own reputation for exorbitant real estate and daily living costs.
Whether you're years away from retirement or little closer, having a budget-conscious mindset can help you avoid some money mishaps.
"One of the biggest money mistakes you can make is spending without knowing," Sam Gaeta, CFP, a wealth advisor at Defined Financial Planning. "Carefully looking over itemized receipts and identifying what you're paying for" can paint a clear picture of where your money is going and help you rein in unnecessary spending.
Video by Helen Zhao
While location plays a role in how much retirement money you ultimately spend, several factors have an impact on how much you can save beforehand. And despite financial setbacks, rising mortgage costs, student loan payments, and slashed wages during the pandemic, many Americans are saving more.
The average 401(k) balance soared to $121,500 in the last quarter of 2020, according to Fidelity. That represents an 8% increase from the year before and a new record. The national average for retirement savings is about $407,500, according to Personal Capital.
As of the fourth quarter of 2020, Fidelity found that account-holders between ages 20 to 29 had an average of $15,000 saved in their 401(k)s. Those aged 30 to 39 had about $50,800, while people from age 40 to 49 had $120,800. Americans between 50- to 59-years-old had $203,600.
Fidelity noted that a lot of people had to take from their savings, too. Between March 2020 and January 2021, around 1.6 million individuals withdrew money from their 401(k) to cover other expenses. The pandemic forced many Americans to reduce how much they set aside for the future or stop saving altogether.
And a third of respondents, 30%, in a separate MagnifyMoney survey from October, said they pulled an average of over $6,750 from their reserve funds because they needed extra cash.
Video by Ian Wolsten
You don't need to break any personal records to increase your retirement contributions. Take care of the essentials like food and housing first, then stash a bit of money at a time into 401(k), traditional IRA, Roth IRA, or another vehicle. Capitalize on workplace matches, too.
"Save as much as you can into your 401(k). The earlier you start, the better," says Amin Dabit, CFP, vice president of advisory services at Personal Capital. "It's hard when you are young and not making a large salary, and it's hard when you're older and big life expenses get in the way. However, the biggest threat to your retirement is inaction."
If you get a raise at work or have extra tax or stimulus money, "immediately put 50% of it toward savings if you're able," says Dabit. "The more aggressively you can save, the better off you will be, and you may even surprise yourself with how much you are able to put away."
Experts recommend investing about 15% of your paycheck for retirement. Consistent contributions over time help propel compound interest to make your money grow. Try Grow's retirement savings calculator, which can help give you a sense of what your goal should be.
More from Grow:
- Here's how much money millennials have saved for retirement, compared to other generations
- Americans boosted their retirement savings during Covid: Here's how much money they put away
- The 4 U.S. states where $1 million in retirement savings would last you the longest