These Are The States Where $1 Million Lasts The Longest
Posted by Tyler Durden on August 26, 2017 1:50 am
Tags: Baby boom, Baby boomers, Bureau of Labor Statistics, Business, Demographics, Demography, Generation, Generation X, Indiana, Inflation, Michigan, Millennials, Missouri Economic Research and Information Center, population, Purchasing Power, Retirement, Retirement spend-down, Social Security debate in the United States
Categories: Baby boom Baby boomers Bureau of Labor Statistics Business Demographics Demography Economy Generation Generation X Indiana Inflation Michigan Millennials Missouri Economic Research and Information Center Population Purchasing Power Retirement Retirement spend-down Social Security debate in the United States
If you had a million dollars, would you retire?
For most Americans, the answer to that question would be no. Which is especially problematic for millennials, who, having been permanently scarred by the financial crisis, are investing at lower rates than members of Generation X or the Baby Boomers, making it more difficult for them to build wealth. Furthermore, the generation that now comprises the largest share of working Americans is having trouble saving money, thanks in no small part to their $1.3 trillion in student debt.
Their present financial predicaments suggest that millennials probably won’t retire in the large numbers that members of their parents’ generation will, primarily out of necessity. Even for some baby boomers, perennially low interest rates since the crisis – and possibly from here on out – have made things more difficult for conservative savers who may now need to redo their longstanding retirement plans to make do with less.
For workers in this situation, choosing a location where they can stretch their money the furthest in retirement is paramount. Enter a new study by GoBankingRates that measures how long $1 million will last in different locations around the country.
“A new report from GOBankingRates measures how long a million dollars would last for retirees 65 and older, state by state. It did that by multiplying the Bureau of Labor Statistics’ mean annual expenditures for that age group by a cost-of-living measure for each state, provided by the Missouri Economic Research and Information Center. The tally separated out annual spending on health care, housing, groceries, transportation, and utilities.”
The upshot is unsurprising: Retirees hoping to squeeze the maximum value from their dollars should head down south:
In Mississippi, retirees can stretch a million dollars for more than 26 years – the longest of any US state, according to the study. Arkansas, Michigan, Tennessee, Georgia, Missouri, Texas, Indiana and Alaska are also states where a million dollars can last for longer than 24 years.
The state where $1 million will be consumed most quickly is, unsurprisingly, California.
According to Bloomberg, the study’s figures are conservative.
“These are conservative figures. They don’t factor in any entertainment or travel, which would make for a pretty grim retirement. Nor do they take into account how inflation might cut into purchasing power as we age. Inflation can take a bigger bite for seniors, because medical costs, which may account for a bigger chunk of expenses, have an inflation rate significantly higher than that for the broad economy.”
And while health-care costs are projected to rise, the study also doesn’t factor in any investment returns on the $1 million.
“Health-care costs for retirees will rise at an average annual rate of 5.5 percent over the next decade, according to HealthView Services, which makes retirement health-care cost projection software. To put that in perspective, from 2012 to 2016, the average annual broad inflation rate in the U.S. was 1.9 percent.”
Of course, to many young people, one day having $1 million in assets seems like an impossible dream. One recent study suggested that 70% of millennials have less than $1000 in savings. But this is just one more reason why they should start thinking about retirement now.