How far will $1 Million go in retirement in your state?

[PandaBear]

Its almost a certainty that living in OK, AL, or KY is significantly more economical than living in CA, MA, or NY.

If someone can't see that by simply taking a glance at the chart, either they are not trying, or they are so biased they don't want to see it.
Feel free to disregard it if you like.

It "depends".

If you are comparing rural Truckee California to downtown Albuquerque, they may not. Or how about if you are comparing Washington average to California average, vs Seattle Washington vs Riverside California?

Cities matter way more than states.

 

[Dave Hess]

$1M is not a lot of money if the person still has a mortgage and is retired with 25 years to live.

 

[billt460]

$1M is not a lot of money if the person still has a mortgage and is retired with 25 years to live.

If they have a million they shouldn't have a mortgage. The first rule of retirement is to rid yourself of debt.

 

[JeffKeryk]

If they have a million they shouldn't have a mortgage. The first rule of retirement is to rid yourself of debt.

That was my rule a long time ago. Debt scares me.
I understand a low mortgage rate may allow for using cash for other investments, but there is always the risk factor.
My plan was always to minimize recurring costs going forward, while continuing to invest in long term securities.
Oh yeah, and don't spend much until the primary house is paid off.
Today I live dirt cheap.

 

[gfh77665]

It "depends".

If you are comparing rural Truckee California to downtown Albuquerque, they may not. Or how about if you are comparing Washington average to California average, vs Seattle Washington vs Riverside California?

Cities matter way more than states.

To try to discredit the chart, you are cherry picking a few rare exceptions trying to prove a point. Again, its a state chart, its not for specific cities. Overall, CA is way more expensive to live in than OK. If you live in Silicon Valley you know this.

 

[Dave Hess]

If they have a million they shouldn't have a mortgage. The first rule of retirement is to rid yourself of debt.

I agree.

I’ve met tons of retired folks with mortgages and personal loans / debt.

Crazy to me but some people retire even if the math doesn’t add up.

 

[gfh77665]

If they have a million they shouldn't have a mortgage. The first rule of retirement is to rid yourself of debt.

If the mortgage was initiated at a historic low rate (2.6% in Dec. 2020) its pays off to keep the debt. I could easily pay mine off, but why would I? Last year I got 6% yields on my cash and paid 2.6% on my mortgage. Its a definite win for me. Many many people refinanced their mortgage then.

 

[supton]

Crazy to me but some people retire even if the math doesn’t add up.

That probably matches a pattern in their lives that existed prior to retirement.

 

[PandaBear]

To try to discredit the chart, you are cherry picking a few rare exceptions trying to prove a point. Again, its a state chart, its not for specific cities. Overall, CA is way more expensive to live in than OK. If you live in Silicon Valley you know this.

My fundamental argument is state is a really bad way to group samples together. The main reason is housing cost and income. Tax can be a differentiator but when you retire, that is still not as big a problem as housing cost. Housing cost is more of an urban vs rural thing.

 

[Astro14]

If they have a million they shouldn't have a mortgage. The first rule of retirement is to rid yourself of debt.

I’m not sure that’s a good rule. “Rid yourself of debt” works if the debt has a higher rate of interest than the return.

But, let’s look at that - I refinanced several years ago at 3.25%.

So, let’s say that I had a theoretical $100K to apply towards retirement goals after than refinancing.

If I put that theoretical $100K in the market five years ago, I would have doubled my money, with an average annual return of over 10%.

IF I paid off $100K on the mortgage, I would have saved the 3.25% for each of then subsequent years, which is a whole lot less than I would have made in the market.

Paying off that loan was a poor use of the money by comparison.

So - it depends. On risk tolerance, projected returns, actual cost of money, and other financial circumstances.

I’m honestly quite glad that I invested over the past several years, rather than paying off the mortgage.

The difference is, quite frankly, huge.

 

[GON]

My fundamental argument is state is a really bad way to group samples together. The main reason is housing cost and income. Tax can be a differentiator but when you retire, that is still not as big a problem as housing cost. Housing cost is more of an urban vs rural thing.

Non concur that a state is a really bad to group samples together.

Your domicile is the perfect example. I don't care where one lives in CA, every single cost in every category will be higher than West Virginia. You can live in Malibu CA, or Barstow CA- does not matter. The annual cost of living in CA, and then add all the regulations that add even more to the fixed cost of living, CA requires much deeper pockets than WV, regardless of what municipality one lives at in California.

Not bashing California. I love the landscape, weather, terrain, and food of California. For retirement, many can't afford California and maintain a certain standard of living. Many more can afford a certain standard of living in West Virginia.

Very simple- no need to make it complex.

 

[Exhaustgases]

I have no idea if medical expenses are part of the equation. I know Medicare is a entitlement, but not sure if Medicare always covers all medical expenses.

Retirees pay extra for medicare as well as a supplemental. So that here is approx $500. out of the SS per month per person (husband and wife)
ENTITLEMENT IS WHEN YOU HAVE NEVER PAID A DIME INTO THE "STUFF". So never call someone that served their life working like a dog as and paying into it as receiving an entitlement.
If we could have the good old days of homesteading, and never pay a tax of any sort, and prices could have stayed at 1960's level (wages too) then we would not be paying 90% of our income into a dark hole, of interest or what ever. And could have a huge savings account and no need for any "Entitlement".

 

[GON]

I’m not sure that’s a good rule. “Rid yourself of debt” works if the debt has a higher rate of interest than the return.

But, let’s look at that - I refinanced several years ago at 3.25%.

So, let’s say that I had a theoretical $100K to apply towards retirement goals after than refinancing.

If I put that theoretical $100K in the market five years ago, I would have doubled my money, with an average annual return of over 10%.

IF I paid off $100K on the mortgage, I would have saved the 3.25% for each of then subsequent years, which is a whole lot less than I would have made in the market.

Paying off that loan was a poor use of the money by comparison.

So - it depends. On risk tolerance, projected returns, actual cost of money, and other financial circumstances.

I’m honestly quite glad that I invested over the past several years, rather than paying off the mortgage.

The difference is, quite frankly, huge.

Great subject, and have pondered a like thought.

The question always in the back of my mind- is there a safety net by being mortgage free? Even if one has the liquid assets to painlessly pay off the mortgage at any time? Are there studies of other countries that were prosperous, and then wealth redistribution happened, and if so, what happens if you had a mortgage that one owes on, compared to having the home free and clear?

Not a good or relevant example, but one worth having awareness. My MIL parents owned land in Germany. At the end of WWII, that land was taken from them without compensation (East Germany). Funny thing, after the fall of the Berlin Wall, the German government returned the property. Issue was the owners had passed, the land went to their adult children, who then had to struggle on what to do (keep the property, sell it, etc).

I never take for granted that the liquid and non-liquid assets a person has can't be taken from that individual and redistributed.

 

[JeffKeryk]

I’m not sure that’s a good rule. “Rid yourself of debt” works if the debt has a higher rate of interest than the return.

But, let’s look at that - I refinanced several years ago at 3.25%.

So, let’s say that I had a theoretical $100K to apply towards retirement goals after than refinancing.

If I put that theoretical $100K in the market five years ago, I would have doubled my money, with an average annual return of over 10%.

IF I paid off $100K on the mortgage, I would have saved the 3.25% for each of then subsequent years, which is a whole lot less than I would have made in the market.

Paying off that loan was a poor use of the money by comparison.

So - it depends. On risk tolerance, projected returns, actual cost of money, and other financial circumstances.

I’m honestly quite glad that I invested over the past several years, rather than paying off the mortgage.

The difference is, quite frankly, huge.

Using the last few years' market appreciation and your low cost of money worked out well, no doubt. Well done Astro!
Of course none of us had a crystal ball. I always minimized my mortgage rate, often time refinancing multiple times in a year and always slapping every extra penny on the payments.
I also continued in the corporate stock plan and maxed out 401K. Options and grants were icing on the cake...
Going further back in time, I sold my San Jose home at a loss in the early 90's downturn so that I could buy a property in an enviable neighborhood at the "depressed" prices. It would have been a real financial stretch otherwise, if possible at all. Actually ended up buying 2 places...

This was my balanced approach, which is based on my Uber conservative fiscal strategy; pretty much a low-risk no-brainer. Being a late bloomer, my priority was to never be homeless again as long as I lived. Everything else was secondary. Today, having a home free and clear, that needs nothing, is a wonderful feeling. More garage space would be nice...

Certainly today the last few years' realizations and cost of money are not likely to be such a great opportunity for some time.
Again, well done. Keep spreading your work ethic and sound advice.

My Mexican friends tell me, "Gracias y adelante"; it means, "Thank you and carry on."

 

[JeffKeryk]

Non concur that a state is a really bay to group samples together.

Your domicile is the perfect example. I don't care where one lives in CA, every single cost in every category will be higher than West Virginia. You can Malibu CA, or Barstow CA- does not matter. The annual cost of living in CA, and then add all the regulations that add even more to the fixed cost of living, CA requires much deeper pockets than WV, regardless of what municipality one lives at in California.

Not bashing California. I love the landscape, weather, terrain, and food of California. For retirement, I can't afford California and maintain a certain standard of living. I can afford a certain standard of living in West Virginia.

Very simple- no need to make it complex.

Eveything you said is true, but it is only one side of the equation. The reason costs are high is there is a lotta money here. Opportunity abounds. I tell people, if you want to do something, come here.

 

[PandaBear]

Great subject, and have pondered a like thought.

The question always in the back of my mind- is there a safety net by being mortgage free? Even if one has the liquid assets to painlessly pay off the mortgage at any time? Are there studies of other countries that were prosperous, and then wealth redistribution happened, and if so, what happens if you had a mortgage that one owes on, compared to having the home free and clear?

Not a good or relevant example, but one worth having awareness. My MIL parents owned land in Germany. At the end of WWII, that land was taken from them without compensation (East Germany). Funny thing, after the fall of the Berlin Wall, the German government returned the property. Issue was the owners had passed, the land went to their adult children, who then had to struggle on what to do (keep the property, sell it, etc).

I never take for granted that the liquid and non-liquid assets a person has can't be taken from that individual and redistributed.

Interesting subject. Here's my take on it looking back in history of my parents and my own. There is a certain level of trust you have to have before you can talk about return on investment. People can take different level of risk for different kind of speculative return.

Owning a home can be a risk, let's say you trust the government you buy your property (let's assume they don't weasel out of situations that leads to you holding the bag), you have to also look at the local laws like the Prop 13 (keeping your property tax capped), the possibility of rent control happening, the possibility of your local neighborhood turning into a slum as it ages (so you cannot sell it and move to a long term care), wild fire risk (insurance only cover rebuild cost and most likely only up to the mortgaged amount), etc.

Let's also say if you are unlucky enough you have to move, and you cannot sell your home because of certain incidents nearby (superfund site, land nearby was eroded away off a slope, factory nearby closing, etc). Renting is IMO a much lower risk if you are this concerned, and you can buy gold even if you are not sure what else to invest in. The only way forward is to diversify so you won't get stuck having nothing left if you place the wrong bet. If you have to sell all the investment to pay off the home then have no other investment, the risk of any one particular incident in life causing you problem is going to be big.

 

[CKN]

Retirees pay extra for medicare as well as a supplemental. So that here is approx $500. out of the SS per month per person (husband and wife)
ENTITLEMENT IS WHEN YOU HAVE NEVER PAID A DIME INTO THE "STUFF". So never call someone that served their life working like a dog as and paying into it as receiving an entitlement.
If we could have the good old days of homesteading, and never pay a tax of any sort, and prices could have stayed at 1960's level (wages too) then we would not be paying 90% of our income into a dark hole, of interest or what ever. And could have a huge savings account and no need for any "Entitlement".

So of us have a Medicare Advantage Plan and pay nothing other than what's allocated for Medicare.

 

[GON]

Eveything you said is true, but it is only one side of the equation. The reason costs are high is there is a lotta money here. Opportunity abounds. I tell people, if you want to do something, come here.

No doubt California has outstanding opportunities.

Not sure a senior citizen with $1 million USD in the bank, and social security as their only income, should pack up the truck and move to Beverly Hills, CA --- or any place in CA.

I have been stuck at SFO from time to time, sometimes a 12+ hour flight delay. I have ventured to Southern San Francisco waiting out the flight delays. I did see older apartments that a senior citizen might be able to rent. Plenty of little coffee shops, tiny grocers, and little restaurants. The issues include can a senior citizen walk upstairs to their apartment, live without a vehicle, and most importantly not get mugged? The airport area in Southern San Francisco (just outside the airport freight area) might be a unique match that is possibly affordable for some select senior citizens on a fixed income. But this scenario is not likely a good fit for senior citizens on a MACRO basis.

Photo credit: By http://www.dvdbeaver.com/film/DVDReviews17/a BEVERLY HILLBILLIES dvd review/title BEVERLY HILLBILLIES dvd review.jpg, Fair use, https://en.wikipedia.org/w/index.php?curid=15993718

 

[Patman]

Interest income on $1 million dollars is about $400 per month

Only if you’re terrible at investing. Even if you only get 2% interest that million dollars will get you $1,666 in income per month (before taxes). And realistically you would have no trouble getting 5% interest with a decent safe investment and that would pay you $4,166 per month before taxes.

 

[Leo99]

My inlaws live solely off their social security. They have $70k in the bank and own their little 1000 sq foot house which is in a desirable location so its worth about $400k. They do ok. Medical expenses are their primary expense.