In his 200th episode, IRA Financial’s Adam Bergman talks about the spending power of your retirement funds in each state.
Where you live is an important factor when you near retirement. The spending power of your funds varies from one state to the next. In this podcast, Mr. Bergman discusses a recent report that shows the spending power your money has in each state. He further discusses how that will affect your retirement planning.
How Spending Power Differs by State
From New York to North Dakota and California to Mississippi, the power of the dollar varies greatly. If you have $100,000 saved in your retirement account, that money is worth a lot more in Mississippi than it is in Hawaii. These two states represent the high and low of your spending power. In Mississippi, $100,000 is actually worth $116, 690. On the opposite end of the spectrum is Hawaii, where $100,000 is worth only $84,390.
Essentially, if you live in the middle part of the country down to the Gulf of Mexico, your money is worth a lot more. On the other hand, if you live on the Coast, such as NY, NJ and California, your money is worth a lot less. For example, that $100,000 in savings is only worth $86,360 and $87,110 in New York and California respectively.
That might not seem like a huge difference, however, by the time you reach retirement, that amount can make a huge difference in a $1 million IRA or 401(k). Therefore, where you retire is almost as important as how much you have saved. The data shows that the closer you are to major cities, the less spending power your money has. Conversely, less populated areas give you more bang for your buck!
How to Use this Data
Retirement plans give everyone a chance to save in tax-advantageous accounts. You don’t pay taxes on the contributions you make to traditional plans. Roth options are funded with after-tax money, but withdrawals are tax-free. If you retire in a state where the spending power is low, you will need to save more.
Obviously, the alternative is moving to a state where the spending power is greater. Instead of living in California, you can move up to Oregon, where the price of one dollar is worth about 14% more.
If you are in a state near the bottom of the list, you may need to work longer to accumulate the amount your retirement funds are worth in a different location. The spending power in each state is generally reflected in the cost of living there. However, that is not always the case. Just because the dollar is worth more there, doesn’t necessarily mean you can get more.
It’s important to take into account all the variables when planning your retirement. The spending power of your funds should be considered when deciding when and where to retire. The more your dollar is worth, the better off you may be.
Thanks for reading, watching and/or listening! As always, if you have any questions, feel free to reach out to us @ 800.472.0646. If you want to check out all of our previous 199 podcasts, please visit our SoundCloud page!