If you’re nearing retirement, you might be thinking in terms of moving to someplace sunny with palm trees and great beaches – like Florida or California. These can be good places to retire if you also want to retire your snow shovel. And every year thousands of Americans do just this. Both California and Florida feature warm weather, beaches galore, great fishing and plenty of golf courses. But if this is where you’re thinking about retiring, maybe you need to think again. Neither of these states is on a list that was published recently of the 10 best places to retire.
The criteria
You may not want to read this but the best places to retire are in colder climates. The 10 states on this list were chosen based on their cost of living, crime rates, quality of healthcare, weather, state and local taxes and general well-being. So, yes, you will still need a snow shovel if you retire to any of the states on this list but you will get a lot in return for putting up with the cold weather.
And the winners are
The Mountain and Midwestern states dominated this list with Utah, North Dakota, Colorado and Wyoming rounding out the top five – after South Dakota. And Florida, despite its appeal, actually ranked 39th or near the bottom of the list. This was due in part to its higher crime and cost of living, plus its lower quality healthcare. And California ranked just 28th as it was weighed down by its cost of living and high state taxes.
1. South Dakota
South Dakota, yes South Dakota, ranks first even though it does feature temperatures that do often dip below freezing. However, this state has quality healthcare, very low crime and no state income tax. Plus, there is a lot to do in South Dakota. Besides the Badlands and Black Hills there is Aberdeen where retirees can enjoy a historical downtown, which features a farmers market and many holiday events, along with easy access to outdoor activities and the local arts.
2. Colorado
One of Colorado’s best-kept secrets is that it offers fairly mild winters. At least that part of the state that isn’t mountainous has fairly mild winters. Beyond this, Coloradans benefit from high quality healthcare and its tax burden is lower than average. In addition, according to the annual survey done by Gallup, its residents rank among the most content in the country. The one downside to life in Colorado is that its cost of living is higher than that of 28 other states.
3. Utah
This state has plenty of options for both city dwellers and nature lovers. For retirees, the cost of living is low and it has high quality healthcare. Salt Lake City has a bustling downtown with cultural events and arts and its light rail system makes getting around the city easy. Plus, it’s just a half hour drive away from skiing hiking, and other outdoor activities. For that matter, Utah is home to five of America’s most amazing natural parks, including Canyonlands and Zion.
4. North Dakota
Well, okay, North Dakotans have to deal with some of the worst and coldest weather in the nation. However, on the upside it has an extremely low crime rate and even better healthcare. And its residents report the highest level of general well being in the nation.
5. Wyoming
If you are conscious about taxes, there is no better place to retire to than Wyoming. It also has moderate living costs and a very low crime rate. However on the downside, the quality of Wyoming healthcare is below that of the other top 10 states.
6. Nebraska
This state not only features a lot of wide-open spaces it is one of the nation’s most affordable. In addition, Nebraska has a relatively low crime rate and its residents report a high level of general well being.
7. Montana
Montana may be one of the country’s largest states but it also has one of the smallest populations. So retirees there have a lot of room to roam. While the cost of living in Montana is not as low as it is in some of the other Mountain states, its lack of a sales tax helps to offset some of this extra cost. Kalispell, Montana boasts the largest freshwater lake west of the Mississippi and also is a regional medical center that ranks as one of the nation’s top hospitals.
8. Idaho
Idaho is not only one of America’s most affordable states it has the lowest crime rate in the country. The state’s tax burden is below that of the national average although Idahoans do pay higher taxes than in the other mountain states. The state’s capital, Boise, provides access to outdoor activities and the arts and there is a massive new cultural center that will open there next year.
9. Iowa
While Iowa is another fairly cold state, it makes this list because of its low crime and living costs and high-quality healthcare. The college town of Iowa City offers retirees the ability to take a class at the University of Iowa or enjoy free outdoor movie nights and concerts throughout the summer.
10. Virginia
Finally, here is an actually warm state. Virginia has one of the lowest crime rates in the country and if you’re looking for a coastal lifestyle, Norfolk is home to miles and miles of beaches as well as kayaking and sailing in Chesapeake Bay. In addition, Norfolk has an art museum, opera house and theater company.
How much do you need to retire?
Of course, it doesn’t matter which state you would like to retire to if you don’t have enough money to support the lifestyle to which you’ve been accustomed. Different experts have different opinions as to how much you need to fund a decent retirement. While this may seem like a simple question, there are many variables involved in getting to an answer. These include when do you need to begin saving? How much could you save every year? When exactly will you retire? What will your investments return?
How you answer these questions and some other key ones, will impact whether or not you will be able to reach your retirement savings goals.
A rule of thumb
According to Fidelity Investments, there is a rule of thumb that can simplify matters. It’s to save at least eight times (8x) your ending salary to help keep from outliving your savings during 25 years of retirement. Does that multiple seem very daunting? Relax. You won’t have to save that 8x right from the start. Instead, you could step up to it over the course of your working life. As an example of this, Fidelity suggests that by age 35 you should be saving 1x of your current salary, then 3xby age 40 and 5x by age 55. It suggests that if you set up clear goals linked to your salary you can simplify your planning and know whether or not you’re on track throughout your working life. It’s especially important in today’s work place to have such guideposts due to layoffs, longer life expectancies, job switching and escalating health care costs that can complicate what you need to save for retirement.
How did Fidelity get to 8X?
If you’re wondering how Fidelity got to that 8X? It started with a hypothetical worker that had an average income and a willingness to save and invest. From there, it evaluated what salary multiple of his or her ending salary that worker would need at retirement to cover his or her estimated retirement expenses. Based on these assumptions, that hypothetical worker would have to save $577,000 by age 67, which would be about 8X his or her ending salary. This is the amount of savings that would cover $51,636 a year in spending, which is that worker’s estimated annual expense in today’s dollars – assuming an income replacement of 85% and subtracting an estimated tax obligation over 25 years in retirement. In this example, the worker would have actually saved $639,236 by age 67 which would be more than the 8X goal and would provide a nice financial cushion.
