As if planning to fund your retirement weren’t difficult enough. In a story in the Denver Post, we now learn of a study by SmartAssets that Denver – and by extension – our beloved Colorado mountains – is one of the country’s most expensive places to retire. This is largely because of the cost of housing. You can click on the interactive map to explore the cost of housing and other typical expenses (food, healthcare, utilities, transportation, etc.) in various communities around the country.
Retirement mythology has us targeting a nest egg of $1,000,000 as the Bare Naked amount to fund a secure retirement. And that’s still a reasonable aspiration; depending on how much Pension/Social Security income you might have and what your spending goals might be. But according to this study, mostly because of the drastically different costs of housing around the country, $1 million might last anywhere between 20 years and 33 years, depending on which of the 268 cities in the study is your retirement destination. (The study assumed that your $1,000,000 would be invested in a relatively conservative portfolio, growing at the rate of 2% above inflation per year.)
Texas appears to be the state in which your money will last the longest, with a couple of cities having average housing costs of around $6,000 per year. Unsurprisingly, cities in California and New York are places where your $1,000,000 will run out the soonest.
Denver ranked 227th on the list, with average annual housing expenses of $12,135.
The only Colorado mountain community in the study was Glenwood Springs, which ranked 106th nationally, coming in at $14,180/year in housing expenses. And we know that communities like Summit County, Vail and Aspen cost considerably more than that.
The study calculated the average cost of living for retirees. Of course, some retirees are able to live mortgage free. Others choose to downsize into either a smaller home or apartment. Either strategy could make remaining in Denver or in the mountains more realistic.
The main point here is that retirement planning is nowhere near a one-size-fits-all endeavor. You need to run the spending numbers for yourself and then rub them up against your ability to save and especially against the various investment strategies – and their risks – you might be considering to employ.
Steve Smith, Principal of Right Path Investments is here to guide you with preparations to take your next step. If you're ready to take that step, schedule some time for a one on one with Steve today.