As you plan for retirement, one of the key considerations is the cost of living. After all, you want to stretch your retirement income as far as possible. Groceries, taxes, a place to live, and maybe even home care — it all adds up! With that in mind, we have analyzed various factors to identify 4 great states with a low cost of living. Is one right for you?
Factors considered
To determine which state is the most affordable for retirees, we analyzed several factors that are critical to a retiree’s financial well-being. These factors include:
Housing Costs
The cost of housing is one of the most significant expenses for retirees. We looked at the median home value and the cost of renting in each state.
Health care costs
As you age, health care becomes increasingly important, and the cost of medical services varies widely across the country. We analyzed the average cost of medical procedures, insurance premiums, and prescription drugs.
Taxation
Taxes can have a significant impact on your retirement income. We looked at the state income tax rates, sales tax rates, and property tax rates.
Cost of living index
This index compares the cost of living in different areas, taking into account factors such as housing, transportation, food, and entertainment.
States with a low cost of living for retirees
1. Mississippi
Housing costs: Mississippi has the lowest median home value in the country at $128,200, which is significantly below the national average of $229,700. The average monthly rent for a one-bedroom apartment in Mississippi is $665, which is also below the national average.
Health care costs: Mississippi has some of the lowest medical costs in the country. The average cost of a doctor’s visit is $94, which is below the national average of $115. Prescription drugs are also cheaper in Mississippi, with the average cost being $359 compared to the national average of $450.
Taxation: Mississippi has a low tax burden on retirees. The state has no estate tax, and Social Security benefits are not subject to state income tax. The state income tax rate ranges from 3% to 5%, and the sales tax rate is 7%.
Cost of living index: Mississippi has a cost of living index of 84.7, which is significantly below the national average of 100. This means that the cost of living in Mississippi is lower than in most other states.
2. Alabama
Housing costs: The median home value in Alabama is $144,400, which is lower than the national average. Additionally, the average monthly rent for a one-bedroom apartment in Alabama is $737, which is below the national average.
Health care costs: Alabama has lower than average healthcare costs. The average cost of a doctor’s visit is $97, and the average cost of prescription drugs is $385.
Taxation: Alabama has a relatively low tax burden on retirees. The state income tax ranges from 2% to 5%, and Social Security benefits are exempt from state income tax. The state sales tax rate is 4%, and there is no estate tax.
Cost of living index: Alabama’s cost of living index is 89.1, which is lower than the national average.
4. Arkansas
Housing costs: The median home value in Arkansas is $135,300, which is below the national average. The average monthly rent for a one-bedroom apartment in Arkansas is $676, which is below the national average.
Health care costs: Arkansas has relatively low healthcare costs. The average cost of a doctor’s visit is $95, and the average cost of prescription drugs is $402.
Taxation: Arkansas has a relatively low tax burden on retirees. The state income tax ranges from 2% to 6.6%, and Social Security benefits are exempt from state income tax. The state sales tax rate is 6.5%, and there is no estate tax.
Cost of living index: Arkansas’ cost of living index is 86.9, which is below the national average.
4.New Mexico
Housing costs: The median home value in New Mexico is $193,200, which is slightly above the national average. However, the average monthly rent for a one-bedroom apartment in New Mexico is $720, which is below the national average.
Health care costs: New Mexico has relatively low healthcare costs. The average cost of a doctor’s visit is $105, and the average cost of prescription drugs is $403.
Taxation: New Mexico has a moderate tax burden on retirees. The state income tax ranges from 1.7% to 4.9%, and Social Security benefits are exempt from state income tax. The state sales tax rate is 5.13%, and there is no estate tax.
Cost of living index: New Mexico’s cost of living index is 92.8, which is slightly above the national average.
Overall, Mississippi, Alabama, Arkansas, and New Mexico are all states that have relatively low costs of living for retirees when compared to the national average. Mississippi stands out for having the lowest median home value and the lowest cost of living index, while Alabama and Arkansas have slightly higher median home values and lower healthcare costs. New Mexico offers a slightly higher median home value and cost of living index, but still offers retirees an opportunity to stretch their retirement income further. It’s important for retirees to consider their own financial situation and preferences when choosing a state to retire in after all it’s your “golden years”!
Sources:
Housing costs: Data from Zillow, a popular online real estate marketplace that provides data on home values and rental prices.
Health care costs: Data from Healthcare Bluebook, a healthcare price transparency company that provides data on the cost of medical procedures and services.
Taxation: Data from the Tax Foundation, a nonpartisan tax research organization that provides data on state tax policies.
Cost of living index: Data from the Council for Community and Economic Research, which publishes the Cost of Living Index, a measure of regional differences in the cost of consumer goods and services.
