September 26, 2014 — Most people understand that some areas of the U.S. are cheaper to live in than others. For the majority of retiring baby boomers who are concerned about maintaining their pre-retirement standard of living, it make a lot of sense to act on those differences. This is highlighted by a recent study by Harvard’s Joint Center for Housing Studies and AARP that showed that an increasing number of America’s retirement age citizens are stressed by their cost of housing. The study also warned that “the nation is unprepared for both the financial and non-financial housing challenges that will accompany the coming explosion in the elderly population.”
The Tax Foundation has developed some extremely interesting maps – by state, town, and part of the country – that shows relative differences in purchasing power. The scale is based on an a purchasing scale of $100: if you have $100 to spend, how much value will you get in different locations. Based on the difference in local prices, in some you can buy more value than you will in others.
Move to the Center – and South
The cheapest states to live in are in the midwest and the south. Here are the states with the most purchasing power:
Mississippi (#1 @ $115.74)
Arkansas (#2 @$114.16)
Missouri and Alabama (tied at #3 @$113.51)
South Dakota, North Dakota, Kansas, Nebraska, Oklahoma, Iowa, Kentucky, Tennessee, Ohio, West Virginia, and South Carolina also give you over $110 in value for your $100.
Here is a link to the Tax Foundation map showing each state and the Relative Value of $100.
When it comes to cities, the midwest and the south offer the most bang for the buck. The least expensive city is Danville, Illinois, where $100 buys $126 in consumer goods, followed by Jefferson City, Missouri; Jackson, Tenn.; Jonesboro, Arkansas; and Rome, Georgia. The Tax Foundation has a very intriguing interactive map that shows the cost of living for a variety of cities and towns across the U.S.
The coasts in this country tend to be the most expensive places to live, except perhaps for the southeastern coast. The District of Columbia is the most expensive, where you only get $84 in value for your $100. In the California area you get $88.57 worth of value for every $100 you spend, compared to the national average. In Los Angeles and other expensive cities and towns, the value is even less. In New York State, you get $86.66. Maryland and New Jersey are also expensive, they each return less than $90.
Of course cost of living is only one factor that you should consider when picking out a place to retire. Proximity to friends and family, climate and geography preferences, recreational and cultural opportunities, and medical resources should all be carefully considered. But if you are worried about your ability to maintain your standard of living once you retire, you should at least consider moving to one of the less expensive areas of the country.
For further reading
The Kids Are Through College, You’re Retiring Next Week, and You’re Dead Broke
More Financial articles about retirement in our Blog
Joint Harvard and AARP Study on Housing Cost Burden
Have you found that where you live is cheaper or more expensive than other parts of the country. Of course what you buy, and what taxes you have to pay, can make your situation different from other people’s.