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Wednesday, January 22, 2020

How Does Your State Stack Up?

image from money.yahoo.com

An article on Yahoo Finance caught my eye yesterday. The topic was which state offered the best financial outlook for retirees. Yahoo Finance cited a study by GOBankingRates as the source of information to rate each of the 50 states. GOBankingRates based their ranking on how long $100,000 would last for a typical retiree, given the expected expenses for a person 65 or over and the cost of living in each state. The study took into account that each retiree would also be receiving Social Security income in addition to using their savings.

Just above the map are blue and green boxes with ascending number of months and years, from left to right, just below. These time spans provide rough estimates for how long that $100,000 of savings would last in their color-coordinating states. Upon finding your state on the map, look at the number. The higher the number, the lower the amount of time $100,000 of retirement savings will last. The lower the number, the greater the desirability.

I live in Washington state, with a teal blue fill and a ranking of 36. This means that out of 50 states, my state is 14 from the bottom on the list of best states in which to retire. The teal fill indicates that $100,000 would last a 65 year old in Washington state, on average, between 1 year 9 months and 2 years.

This study didn't address situations such as one part of a state having a significantly higher cost of living than another part of the same state. In addition, it's not clear what kind of spending habits this study forecasted for typical retirees for a $100,000 draw down of their savings. It's very possible that some folks in my state could go through $100,000 in much less time than 1 year 9 months, if they live in the Seattle metropolitan area and tend to live more extravagantly than others. Meanwhile, it's also very possible that other folks may take much longer than 2 years to draw down $100,000, if they live away from the urban center and have always made frugal choices for their life.

They say that the best predictor of future behavior is past behavior. I know several people who earn over $100,000 per year, yet they say they're living month to month with nothing left over to put into savings. And I also know some people who earn half that amount and still have enough left over to add a substantial amount to their savings each month. This knowledge gives me hope that we'll be able to make that $100,000 last much longer than the experts forecast. 

Part of that achievement will be in the provisions that we make now that will enable us to spend less in years to come, such as making our home more energy efficient, setting up easy-to-work raised vegetable garden areas in our yard, planting fruit trees now for harvest in the next decade, making sensible health choices today in order to use less medical care later, and creating streams of income to sustain us in post-retirement years. Or, we may just move to Mississippi.

How did your state stack up in this ranking? What kinds of provisions are you making now that will help you live frugally later?
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