[vc_row][vc_column][vc_column_text]Retirement planning is difficult. There are many assumptions that need to be made, one being where you will live and how far your money will go. Bloomberg had an interesting article about a study by GoBankingRates that ranked all 50 states by how far $1 million can go in retirement.
This study was a rather basic analysis of the costs of groceries, housing, utilities, transportation and healthcare in each state divided into $1 million, resulting in the number of the years the money would last. The larger the expenses the less amount of time the money would last.
As may be expected Hawaii fared the worst because the average expenses were greater than $80,000, your retirement money could only last 11 years and 11 months there. However, if you retire in Mississippi, the best-ranked state, you could last 26 years and 4 months. Some may argue they would rather die broke in Hawaii than live anywhere else; that may be debatable.
This study has limited use because it ignores a couple factors that need to be accounted for in retirement planning. One being a return on your $1 million, even some minimal return will make your money last longer than these estimates.
In addition, they didn’t account for inflation either which can and will have an impact on your purchasing power throughout your retirement. Investment returns and inflation rates need to be factored together to create a “real return” to be used for a retirement plan. This gives us a more realistic retirement picture.
Finally, the expenses used for this study are limited. Many seniors would argue they expect more from their retirement including golf course membership, travel, entertainment and gifting to family. Add those costs and you can see things change drastically.
This study does provide a good starting point in a retirement plan, though. It gives some context as to how important it is deciding where you will retire based on the cost of living of that state.
If you haven’t recently reviewed your retirement plan you should contact your CERTIFIED FINANCIAL PLANNER™ Practitioner.
If you aren’t currently working with a CERTIFIED FINANCIAL PLANNER™ Practitioner you can find one HERE.[/vc_column_text][/vc_column][/vc_row]
08/21/2017
