If you have 401k plan participants who plan on retiring when they hit that old “magic number” of $1 million for retirement, for God’s sake tell them to avoid the Bay Area!
That’s where a seven-figure retirement nest egg will evaporate the fastest, according to new research from GOBankingRates.
We all know the San Francisco Bay Area and Silicon Valley—extending into Oakland and San Jose—is one of the most expensive places to live and work in the U.S.
But even if you saved your million there, you would probably want to think twice about staying in retirement. Those three cities—San Francisco, San Jose and Oakland—rank as three of bottom four (interrupted only by New York City) in terms of where $1 million will last longest in retirement in the new GOBankingRates rankings of the 50 biggest U.S. cities.
In last-ranked San Francisco, your $1 million would only last 8 years, 3 months and 19 days. Compare that to top-ranked Memphis, Tenn., where GOBankingRates says that same $1 million would last a whopping 45 years, 4 months and 1 day.
GOBankingRates based its calculations on the average retirement age being about 62 for women and nearly 65 for men, while the average life expectancy in the U.S. is 79 years. That means retirement savings would need to last between 14 and 17 years.
On average, adults 65 and older spend $50,860 a year, according to the Bureau of Labor Statistics, equating to $712,040 over 14 years and $864,620 over 17 years. The study notes that Social Security benefits cover a portion of annual expenditures in retirement.
When you factor in the average monthly Social Security benefit of $1,381.79 and consider the average cost of living in the United States, GOBankingRates says $1 million could actually last as long as 29 years, 1 month and 24 days.
But of course there are plenty of places in the U.S. where the cost of living is much higher than the national average, so $1 million won’t last nearly as long as that. On the other hand, if retirees live in a place where the cost of living is low, a nest egg that large could keep them living comfortably for years beyond the average.
To compile its rankings, GOBankingRates calculated average annual expenditures in each of the 50 largest U.S. cities for people 65 and older using data from the Bureau of Labor Statistics and cost-of-living indices from Sperling’s Best Places. This annual expenditure figure then was reduced by the average annual Social Security benefit. GOBankingRates then divided 1 million by that number to calculate how long $1 million in retirement savings would last in each city.
5 Cities Where $1 Million Lasts Longest
1. Memphis, Tennessee: 45 years, 4 months, 1 day
2. El Paso, Texas: 40 years, 3 months, 22 days
3. Wichita, Kansas: 39 years, 8 months, 27 days
4. Tulsa, Oklahoma: 38 years, 10 months, 15 days
5. Indianapolis: 38 years, 7 months, 23 days
5 Cities Where $1 Million Lasts Shortest
1. San Francisco: 8 years, 3 months, 19 days
2. San Jose: 10 years, 9 months, 20 days
3. New York City: 12 years, 8 months, 16 days
4. Oakland: 13 years, 10 months, 10 days
5. Los Angeles: 13 years, 11 months, 19 days
Full Rankings: How Long $1 Million in Retirement Lasts in 50 U.S. Cities
SEE ALSO:
- $1.46 Million: New ‘Magic Number’ for a Comfortable Retirement
- Top 20 Best and Worst Cities at Money Management
- Best Places to Retire in 2020: Hope You Like Florida!
- 2020’s Best Foreign Countries for Retirement Living
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
