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Retiring comfortably in New York could require nearly $950,000 in savings, according to a new study by Investopedia.
The analysis estimated how much the average American needs to retire at age 65 by factoring in annual living expenses, expected Social Security benefits and the widely used 4% withdrawal rule. It then compared retirement costs across all 50 states and Washington, D.C.
Although New York offers access to world-class amenities and health care, the state's high housing and living costs make it one of the nation's most expensive places to retire.
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How much do you need to retire in New York?
According to Investopedia, the average person needs about $945,000 in retirement savings to retire comfortably in New York.
The estimate assumes retirees follow the 4% rule, which suggests withdrawing 4% of retirement savings during the first year of retirement and adjusting that amount annually for inflation. The strategy is designed to make retirement savings last about 30 years.
Investopedia estimates the average retiree in New York spends about $61,700 per year on housing, groceries, transportation, health care, entertainment and other expenses.
With the average annual Social Security benefit estimated at $23,704, retirees face an annual income gap of roughly $38,000, which must be covered by retirement savings.
New York ranks among the most expensive states to retire
New York's estimated retirement savings requirement is about $52,000 higher than the national average of approximately $898,000.
The study notes that New York does not tax Social Security benefits, and that tax advantage is reflected in the calculations.
Which states are the most affordable to retire in?
According to Investopedia, the states requiring the least retirement savings are:
- North Dakota
- Arkansas
- Mississippi
- West Virginia
- Iowa
The most expensive places to retire are:
- New Jersey — about $1.02 million
- Hawaii — about $1.02 million
- California — about $1.01 million
- Washington, D.C. — about $1.01 million
How Investopedia calculated retirement savings needs
Investopedia based its estimates on four primary factors:
- Housing costs, including mortgage status, rental rates and monthly housing expenses
- Non-housing spending, including discretionary expenses adjusted for regional costs
- Expected Social Security income
- The annual income gap, calculated using the 4% safe withdrawal rule
The analysis used data from the U.S. Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis and the Social Security Administration.
This article originally appeared on Rockland/Westchester Journal News: Can you afford to retire in New York? It may cost you almost $1 million
