If you want to retire early, then you have to do a lot of planning. After all, you’ve got to anticipate a variety of factors about the future. Then you have to make a strategic plan that incorporates what you anticipate.
One of the things that you have to take into consideration is where you currently live as well as where you will live in the future. Of course, this is partially about housing, mortgages, and future property tax payments.
However, there’s more to it than that. Research indicates that it’s a lot easier to retire early if you live in some states than it is if you live in others. Of course, you have to consider your own personal happiness, goals, job options, etc. With that in mind, though, let’s take a look at the best and worst states for early retirement.
Retire Early: Ages 35, 45, and 55
What does it really mean to retire early? These days, “early” could be as young as your thirties or up into your fifties. How Much created a set of three different maps indicating how much money is necessary to retire early. There’s one map for retiring at age 35, another for age 45, and a third for age 55.
Here are a few facts about how they came up with these numbers:
- They calculated the annual cost of living for each of those three ages.
- They used a BLS survey along with additional information to adjust that information by state.
- Each state’s number was then divided by 4%, which is an annual projected withdrawal rate.
It’s important to understand that these numbers are just averages. Many factors affect these numbers. For example, the numbers aren’t adjusted for inflation. Moreover, the presumption of a 4% withdrawal rate could be wildly off for some people. In other words, although the information here is useful, it isn’t concrete. With that in mind, let’s look at the best and worst states for retirement.
The Best and Worst States to Retire Early
Since the calculations are based on the cost of living, it’s obviously going to be easier to retire early in those states where cost of living is lowest. Overall, Mississippi is the best state to retire early at any age. In contrast, it’s challenging to retire early in states like California or New York, where the cost of living is highest.
Retiring in Hawaii is the most expensive of all. In fact, it’s the only state where you need more than $3 million to retire.
Speaking regionally, you need less money to retire in the southern states than you do in the northeastern states or along the West Coast. In the upper midwest, it becomes significantly cheaper to retire at age 55 than at earlier ages.
It’s Hard to Retire with Less Than $1.5 Million
Some people are able to retire with $1 million in the bank. If you invest it wisely, you can get back a good interest rate. If you embrace frugal living, then you can make the most of that money.
However, the research here indicates that on average people can’t easily retire with just $1 million in savings. If you want to retire early at any age then you likely need at least $1.5 million. The younger you are, the more that you will need.
You will likely need more than $2 million to retire at any age in the following states:
- New York
Taking Income Into Consideration
If you want to retire early, then you need to earn a certain amount. In order to do that, you may need to live where your best job prospects are. The states that require the most money to retire are also the ones that tend to pay the most.
For example, if you get a high-paying tech job in California, you’ll make a lot of money. However, you’ll also have to spend more to live in California. Therefore, it’s harder to save up. That said, you might not be able to get the same job in Mississippi. Even though it’s cheaper to live there, if you can’t earn a good income, then you won’t be able to retire early.
This might account for the fact that in most states you need more money to retire at age 45 than you do at either age 35 or age 55. For example, to retire in Oregon, you’ll need $2.23, $2.39, and $2.1 million respectively. You’ve stayed there an additional ten years, which means you’ve had to pay more for your cost of living than if you had left at age 35. However, if you stay another ten years, you’ll be able to live off of slightly less.
Perhaps the best option is to move to one of the states where you will get paid the most, live as frugally as possible there, put as much as you can into savings, then retire to one of the other states where the cost of living is cheapest.
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