Housing Costs Too High?
by Barbara Roberts
We all knew retirement was coming, but somehow, it was always at a time in the distant future. It’s amazing how quickly it snuck up on us, and how suddenly we realize we might not have saved enough to get us all the way through this “Golden Age.” Of course, retirement savings, coupled with Social Security benefits, were the promise that this phase of our lives would be easy. Sadly, for us, the economy and the stock market have whittled away at those retirement savings. And recently, having received the Social Security Cost of Living (COLA) boost for 2021: It ain’t nothin’ to write home about! I’m writing about it here because my Baby Boomer friends and I are increasingly beginning to calculate how fast our retirement savings may run out. Of course, we are still young enough that more changes in our lives can be made to tighten our belts, or we can decide to get a part-time job.
Can’t We Just Spend Less?
I know, the combo of pension/retirement savings and Social Security is less than we anticipated, so we are already forced to spend less! People simply don’t realize how expensive it is to live in the United States, but there are a few things we can do to mitigate expenses. If you live in a state that has an income tax, maybe moving to one that does not is the answer. Do you grouse every tax season that between the Feds and the state that they are “killing you?” Then you might want to give some serious thought to relocating to one of the seven states that have no income tax requirement. Do your research though, because housing costs are pretty high in a couple of those states. You certainly don’t want to eliminate the income tax, just to take on higher expenses in another category.
Is Relocation a Viable Option?
Many Americans are willing to at least think about a move if it means that their retirement dollars will go further. So, another possible way to spend less, whether you have a state income tax or not, is to think about relocating to a state that is not on any coast. The states with shorelines are the ones that have the highest costs of living. Usually, just one “side” actually touches water, and costs of living decrease the farther away you get from coasts. So, that means that some of those states with shorelines are in the top ten of reasonable places to live, with Mississippi at number one, according to worldpopulationreview.com. For all intents and purposes, they are land-locked, but cities with property on the water do have higher costs.
If the South doesn’t appeal to you at all, you might want to find a state that is fully land-locked in the middle of the country that does have some appeal. Then you can save money, and go to the coasts for vacation with some of your savings! There are so many financial, investment, and insurance companies conducting surveys about different locations, and providing livability information. Although they don’t always agree, and things might change from year to year, the insights are useful. My advice is to visit places you might be interested in relocating to, to see for yourself if they are a fit for you.
And, while you are doing your research, be sure to investigate indicators that contribute to a state’s ranking in cost of living. What percentage of the population is at or over age 65? What is the average annual income of those over 65? Consider health care costs too, what you need to have saved to make it through retirement. What can the average retired couple expect to pay for health care in each state? Is the state’s cost of living ranked higher or lower than the United States’ average? Is the state considered to be tax friendly for retirees? The best scenario would be to select a location where you love the ambience of the place, and you feel like you could live there; there is a sizeable older population, and you would have the ability to interact with all ages; and most importantly, you could afford to live there for a long time.
Which States Have Appeal?
For example, you might consider Oklahoma, with the second-lowest cost of living in the United States. Factored into the rankings are housing, transportation, and wages. If you sell your current home, and want to purchase a new one wherever you land, the median home value is about $130,000 in the Sooner State. You will be able to find a two-bedroom apartment for an average of $879 a month. Transportation costs are low, and gas prices are one of the best in the country. Wages are commensurate with the low cost of living, with median household income at $51,424. Its cost index is 87. That certainly beats out Arizona, which was the go-to place because of its mild winters and low cost of living, but the Grand Canyon State has since shot up and now comes in at a cost index of 97, while Florida is at 97.9 and places like Virginia, Pennsylvania, Colorado, Montana, Nevada and New Hampshire range from 100.7 to 109.7. As an island, in the middle of the Pacific Ocean, it should come as no surprise that Hawaii has the highest cost of living, with a ranking of 192.9. The District of Columbia has a distant second, but still high cost of living at 158.4.
What About Outside the U.S.?
I have a male friend who is single and who decided it would be cheaper to move to a South American country as his home base, and take excursions all over the world. He comes back to the states at least once a year, and his family has visited him in Ecuador. He has met a lot of interesting people in the 5+ years he has been living outside the U.S., and he is still happy with his decision. Could you do it? Jade Scipioni, writing for cnbc.com, highlights 4 tropical places not far from the United States, in which you could live well for less than $2,000 month. Until the pandemic is under control, however, U.S. citizens may not be welcome in all these countries, and I would be hesitant to make such a move until EVERYBODY has gotten the vaccine. But, there’s no harm in looking!
Let’s start with Mexico, the closest, since we share our southern border with them. It has great appeal for American ex-patriots. Some spend half the year residing in one of their cities, enjoying the great weather, the low cost of living, and the chance to participate in their alive and exciting culture. Just stay away from the cities that report high crime rates. Just this morning, I read an article posted on CNBC about an American woman who has been living in Mexico for a number of years. Janet Blazer wrote a piece detailing the ten things she wishes she knew before retiring there on $1,000 a month. Very helpful, and useful if you decide to move other places as well.
Like Costa Rica, a beautiful, but small, Central American country that prides itself on preserving its natural resources. Its varied climates are influenced by both the Caribbean Sea and the Pacific Ocean. It is a great place to go for those looking for a healthy, outdoorsy lifestyle.
A bit further south is Panama. It is on the isthmus that joins Central and South America together. Known for the Panama Canal, the little country is a mix of both the natural and the modern. You can find a two-bedroom house to rent for just $800 a month in one of the mountain towns that is about 40 miles from Costa Rica.
Looking further south, and just to the north of the South American continent is Colombia. Although there are modern accoutrements, what is lovely is the preservation of its rich culture. The Republic of Colombia has a favorable healthcare system, ranking 15 points higher than the U.S., according to the World Health Organization.
Presented here are just four countries offered as examples of places outside our borders where you can live well without breaking the bank. When you think about it, it is possible to cut back on some discretionary expenses, but those don’t usually take a big chunk out of the budget. The cost of simply living, which includes housing, groceries, healthcare, transportation, taxes, etc. is the big culprit. A lot of retired Americans have decided to relocate from more expensive areas to those both in and out of the United States in order to preserve their capital and get more bang for their bucks. I’m going to keep exploring…I hear there are some good opportunities in Europe too!
What do you see as YOUR options for stretching those dollars?
