A comfortable retirement in the United States is increasingly one with substantial savings—especially in those states where costs far outrun national norms. For those reliant on Social Security benefits, the financial reality is starker: Three states—Hawaii, Massachusetts, and California—demand more than $1 million in retirement savings just to keep up with basic living expenses—showing just how wide the gap between fixed incomes and burgeoning costs has grown.
Hawaii: The $2 million retirement
Hawaii is the most expensive state for retirees, requiring $2.21 million in savings to fund a 25-year retirement. Consider that estimate includes necessities such as housing, utilities, groceries, transportation, and healthcare—all significantly higher than the national average. For example: The median home value is over $856,000 nearly triple the U.S. average.
- Annual living expenses for retirees are $88,000 in Honolulu County alone.
- Groceries and health care are 25–30% higher than mainland averages due to import dependencies.
Even with Social Security benefits, retirees don’t have enough. One recent study concluded that $1.5 million in savings, plus Social Security, would last only 19 years in Hawaii—well short of the 25-year benchmark4. What’s more, while Social Security income is tax-free, withdrawals from retirement accounts such as 401(k)s and IRAs are taxed, further squeezing budgets.
Massachusetts: Northeastern high costs
Massachusetts ranks second in terms of the amount needed for a 25-year retirement at $1.6 million. Some of the major cost drivers include:
- Housing: Median home value in Boston is over $800,000 with rents 50% higher than the national average.
- Healthcare: The state has some of the highest medical costs in the U.S., with annual expenses for retirees averaging $12,000.
- Utilities: Energy costs are 40% higher than the national average because of cold winters and aging infrastructure.
Social Security benefits replace only a portion of these expenses. The retiree receiving the average monthly benefit of $1,877, for instance, would still have to withdraw 4% a year from savings to fill the gap—a drawdown rate that depletes assets relatively fast in high-cost states.
California: Sunshine at a steep price
California rounds out the top three, where $1.43 million is required for 25 years of essentials. Urban centers such as San Francisco and Los Angeles drive housing costs up:
- Housing eats up 35–40% of retiree budgets, with a median home price approaching $856,000 statewide.
- Transportation expenses are 20% above the national average, driven by elevated fuel prices and reliance on personal vehicles.
- Utilities and groceries are 15–25% higher than in states like Texas or Florida.
Notably, California taxes most retirement income, including 401(k) withdrawals and pensions, thus reducing disposable income for residents. Even with the best budgeting, the state’s high inflation rates—3.2% annually—erodes purchasing power over time.
Why these states demand millionaire status
Three factors constantly drive up retirement costs in these states:
- Housing: Low inventory and high demand on the coasts and in urban areas drive up prices.
- Healthcare: Premiums and out-of-pocket expenses exceed national averages.
- Taxes: State income taxes on retirement withdrawals and property taxes further strain budgets.
These problems are exacerbated by Social Security’s shortcomings. While benefits average $22,524 annually, they replace only 25–30% of living expenses in high-cost states. The commonly applied 4% withdrawal rule, which assumes a gradual drawdown of savings, doesn’t adjust for regional cost differences, putting many at risk of falling short.
Implications for retirees and Social Security
A burgeoning retirement savings gap has brought some key issues to the fore:
- Benefit shortfall: Social Security replaces only 40% of pre-retirement income for middle earners—far short of the 70–80% financial planners recommend.
- Regional disparity: Mississippi retirees need $712,913 to last 25 years—less than half as much as in Hawaii.
- Longevity risks: Rising lifespans mean $2.46 million is needed for a 30-year retirement in Hawaii, a sum most Americans can not reach.
Strategies to bridge the gap
Proactive planning can temper these obstacles:
- Relocate: To inexpensive states like West Virginia, where $1.5 million will last 133 years.
- Delay retirement: Working until age 70 increases Social Security benefits by 24% and decreases drawdown periods of savings by 3 years.
- Consult advisors: Financial planners can optimize tax strategies and withdrawal rates; resultants may extend savings 10-15 years.
While retiring in paradise or cultural capitals is aspirational, the financial realities demand planning with the greatest care—especially considering the uncertain future of Social Security due to forces political and economic.
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