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Where You Need More Than $1 Million To Retire

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As the golden years near, many become hyper-focused on how big a nest egg they need to retire. Not surprisingly, the size hinges largely on where that nest is needed, as the cost of housing and other living expenses vary widely by locale.

Our latest LendingTree study calculates how much people need to retire in each U.S. metro using different methods: based on the amount retirees spend in a year and on the median annual earnings of people ages 55 to 64.

We found that it takes more than $1 million to retire with an average lifestyle in nearly 40% of the 384 U.S. metros based on the former assessment, but significantly less on the latter assessment. (By significantly, we mean just one metro.)

Key findings

  • You need more than $1 million to retire with an average lifestyle in 147 of the 384 U.S. metros. Nationally, retirees would need an average nest egg of $1,071,127. A retiree in San Francisco needs a nest egg of $1,365,870 on average — the highest total across the U.S.
  • 12 of the 20 metros that require the biggest nest eggs for retirees are in California. San Diego ($1,298,796) and San Jose ($1,276,997) join San Francisco in the top five.
  • You can retire with an average lifestyle for less than $800,000 in just one metro: Johnstown, Pa. The Pennsylvania metro slides just under that mark at $779,765. Cumberland, Md. ($802,988), and Danville, Ill. ($804,301), are closest.
  • Locals may need far less to maintain their incomes near retirement age once they collect Social Security. If you focus on the median income of near-retirement-age workers rather than average spending by retirees, residents in just one metro would require more than $1 million to retire — San Francisco. Nationwide, the average nest egg needed under this calculation is $768,742.

Methodology

To calculate the amount of retirement assets required to retire in each metropolitan statistical area (MSA), LendingTree analysts performed two separate calculations.

The first took the estimated annual expenditures of retirees in each MSA and calculated the pretax amount. We then subtracted the average annualized Social Security retirement benefit for each state to determine the remaining income retirees would need, on average, to maintain that level of spending. Average Social Security benefits were calculated as the averages the Social Security Administration reported for 2021 (the latest available), plus the cost-of-living adjustments for 2022 and 2023. We then divided that amount by 4% to apply the “4% rule” to calculate the necessary assets required to meet the average spending level.

For the second, we subtracted each state’s average Social Security benefit from the estimated median earnings for full-time workers ages 55 to 64 and then applied the 4% rule.

Analysts estimated the average annual spending of retirees in the U.S.’s 384 metros by multiplying the average annual expenditures of retirees from the U.S. Bureau of Labor Statistics’ (BLS) 2021 Consumer Expenditure Survey (the latest available) by the U.S. Bureau of Economic Analysis’ (BEA) 2020 Regional Price Parity (the latest available) for each metro. This was further multiplied by the year-over-year change in the BLS’ consumer price index between October 2021 and October 2022 to more accurately show the growth in inflation.

Median annual earnings of full-time workers ages 55 to 64 were estimated by multiplying the median earnings of all full-time workers in each metro from the U.S. Census Bureau 2021 American Community Survey (the latest available) by the ratio of annualized median weekly wages of full-time workers ages 55 to 64 in the third quarter of 2022 to the annualized median weekly wages of all full-time workers in the third quarter of 2020 from the BLS.

We were conservative in our tax assessment by assuming a federal tax rate of 22%, as the target income levels in every metro fell within that bracket (and the relevant tax rate for that bracket within each state’s tax scheme), unless that state was reported as not taxing Social Security retirement income in 2022. For metros that cross state lines, we applied the rate of the first state of the metro name — where more people reside. We note that not all retirement income is taxed under income rules and that individuals and families may be eligible for additional credits and deductions.

147 metros where you need more than $1 million to retire

If you had $1 million, you could do a lot of things, like building a tree fort in your yard or buying an exotic pet like a llama or an emu (if you’re taking suggestions from Barenaked Ladies). But you might be better off saving it for retirement as you’ll need it. Our study finds that it takes more than $1 million to retire with an average lifestyle (based on the average spending of retirees) in 147 of the U.S.’s 384 metros. That’s 38% of U.S. metros.

How much more? Well, if you want to retire in San Francisco, it takes an average of $1,365,870 — the most among any metro. Rounding out the five places you’ll need the biggest nest egg to retire are New York ($1,315,587), San Diego ($1,298,796), Honolulu ($1,288,763) and San Jose, Calif. ($1,276,997).

According to LendingTree senior economist Jacob Channel, many factors contribute to how expensive a metro is, including:

  • How many people live there/want to live there
  • How many/what kind of homes there are
  • What zoning and building laws look like
  • What sort of industries are most common

For example, high housing costs in San Francisco are often attributed to strict development regulations and scarce land. That’s resulted in limited supply in a city with high demand. Add that it’s close to Silicon Valley, with high salaries that can drive up prices, and it’s no wonder San Francisco — and San Jose — are pricey places to live and retire.

According to our research, an average nest egg of $1,071,127 is needed to retire across the U.S.

“Ultimately, each metro is unique and will have its own quirks that can make it more or less expensive,” Channel says. “This is true of metros that are ostensibly similar or that are in the same state. Anyone thinking about retiring in a given area should thoroughly research it before packing their bags and moving. Don’t let your preconceived notions or vague ideas about an area dictate whether you choose to live there.”

If you’re California dreamin’, you likely need a significant nest egg

While San Francisco, San Diego and San Jose are at the tippy top of the list of where you’ll need the biggest nest egg to retire, other California metros aren’t far behind.

In fact, 12 of the top 20 metros are in the Golden State. Joining them is Los Angeles at sixth, where it takes a nest egg of $1,273,643 to retire and maintain an average standard of living. LA is followed by:

  • Napa ($1,265,259)
  • Oxnard ($1,265,259)
  • Salinas ($1,253,521)
  • Santa Maria ($1,241,783)
  • Santa Rosa ($1,238,429)
  • San Luis Obispo ($1,233,398)
  • Santa Cruz ($1,231,721)
  • Vallejo ($1,214,953)

Could it be the weather, the gorgeous landscapes or the plethora of opportunities for business and recreation that push the price to retire in California’s metros to the top? It’s likely a combination of all those factors that makes it an attractive place to live. And with high demand and limited supply, up go the prices for housing.

The state is also highly regulated, which can drive up prices for certain factors that contribute to the cost of living. For example, California is second only to Hawaii among gas prices as of Jan. 18, according to AAA.

“Simply put, California is a very attractive state for a lot of people,” Channel says. “The climate is generally agreeable, there is a lot of variety in terms of the geography that one can experience within the state (from beaches to mountain ranges), and there are a lot of stable (and often high-paying) jobs to go around. Owing to how appealing California is, many people want to live there. This means there is less housing supply and other resources, and the cost of living is higher. For many retirees, this higher cost of living can be well worth it, even if it requires more savings.”

Other states with metros that make top 20 appearances include New York, Hawaii, Florida, the District of Columbia, Colorado and Washington. The only metro primarily in a landlocked state in the top 20 is Denver, where you’ll likely need a nest egg of $1,243,532 to retire.

Cheapest metro for an average lifestyle: Johnstown, Pa.

There are plenty of places where you don’t need to reach the million-dollar mark when it comes to retirement savings, though. For example, in Johnstown, Pa., you need “just” $779,765 to retire and maintain an average lifestyle based on the average spending of retirees — the lowest amount among any of the U.S. metros.

The other metros in the “bottom” five are:

  • Cumberland, Md. ($802,988)
  • Danville, Ill. ($804,301)
  • Florence, Ala. ($812,485)
  • Duluth, Minn. ($821,084)

In San Francisco, you need more than $1 million to retire based on the median income of near-retirement-age workers

Things change a bit when we switch to our secondary look at nest-egg needs based on the median annual earnings of near-retirement-age workers.

San Francisco is still at the top, requiring $1,010,871 to maintain an average standard of living (based on median income). But, it becomes the only metro where you’ll need more than $1 million to retire with that median income of a near-retirement-age worker.

Based on our research, the average you’ll need across the U.S. is $768,742 — significantly less than the average based on the current spending of retirees.

Looking at the data in both formats, the metros where you’ll need the biggest and smallest nest eggs remain largely the same. Those in hot spots like California, Hawaii and New York are at the top, while those in smaller, more landlocked locations, particularly those in the South and Midwest, trend toward the bottom.

However, the difference in how big of a nest you’ll need in each is quite significant. For example, we found you can retire comfortably in Alexandria, La., with $388,865 based on the median income of near-retirement-age workers. Based on the current spending of retirees, we found you’d need $995,646. That’s a difference of more than $600,000.

Why the differences? Social Security, inflation and tax setups are some of the biggest factors that affect the nest-egg number. And, of course, spending habits may shift throughout retirees’ lives.

Does that mean you can get that llama or emu after all? That’s up to you (and the exotic pet laws in your area), but Channel says — generally — the sooner you start saving for retirement and the more careful you are with your money, the easier it’ll be to save the nest egg you need.

“Of course, having a high-paying job and not a lot of debt — two things that many people don’t have — will make saving much easier,” he says. “And, even if you do ‘everything right,’ there’s no guarantee you’ll ever end up with a million-dollar nest egg. That said, a million dollars isn’t something everyone will need to have a happy retirement. What matters most is saving what you can and planning a lifestyle around the finances that you do have, instead of the finances that you wish you had.”

Should your home serve a role in retirement?

A home is most people’s biggest asset, and Channel says leveraging your home for retirement often makes good financial sense.

For example, a person who chooses to downsize in retirement might be able to sell their current house for a profit and pocket some cash after they buy a new, smaller and less expensive place. Similarly, someone might use a home equity loan to pay down higher interest debt before they retire.

He cautions, however, against treating a home as nothing more than an investment for your retirement years.

“If you’re too focused on increasing its value, you might end up biting off more than you can chew in terms of things like renovations,” Channel says. “You might also make yourself miserable worrying about every little defect your home might have. Remember that the main point of owning a house for most people shouldn’t be to make money off it. Instead, it should be to, you know, live in it.”
 

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