The state with the highest cost of retirement is not New York or Hawaii.
Despite being home to one of the world's priciest cities, New York is no longer the most expensive U.S. state to retire, according to Bankrate.
In 2021, California surpasses New York as the most expensive state to retire, according to Bankrate's annual ranking.
Bankrate analyzed various sources to determine affordability by examining state-level data on cost of living, sales taxes, property taxes, and homeowners insurance.
According to Bankrate, the top 10 most expensive states to retire are:
California living doesn't come cheap
The cost of living in California is significantly higher than the national average, with housing costs being particularly expensive.
If you live in California, a $1 million retirement fund would only last approximately 14 years, according to Fidelity, despite retirement potentially lasting 25 years or more.
Financial wellness leads to happiness, wealth, and financial security.
The cost of living in Sunnyvale, California is approximately 125% higher than the national average, while the cost of living in Bakersfield, which is about two hours from Los Angeles, is only 10% higher, according to RentCafe.
Retirees in California pay a higher tax on their retirement benefits compared to other states. While Social Security retirement benefits are not taxed at the state level, withdrawals from 401(k)s, IRAs, pensions, and other retirement accounts are considered taxable income.
A pricey retirement destination requires saving more
You don't have to abandon your dream of retiring in California or any other location because of the high cost of living. Instead, you may need to save more money while you're still working.
"According to Anne Lester, a retirement expert and author of "Your Best Financial Life," the more expensive the living space you desire, the more you need to save."
Comprehending the cost of your desired retirement location can aid you in establishing a savings target to achieve a comfortable retirement.
Determining what you're willing to sacrifice in the short-term to achieve your long-term retirement goals, according to Lester.
To achieve your dream of retiring in an expensive location, you may need to make some sacrifices, such as downsizing your home, driving a less expensive car, or cutting back on travel expenses to save more for retirement, suggests she.
Lester suggests considering it as a compromise between your immediate desires and long-term goals.
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