What a Comfortable Retirement in Major US Cities Could Cost in 10 Years

Planning for a comfortable retirement in the U.S. isn’t the easiest thing to do these days, especially with the rising cost of living. Each year, everyday things — from services to goods — seem to be a little more expensive than they were before. This is just as true of residential real estate as it is of groceries. And while costs sometimes dip, they generally end up going up eventually.

Even so, it’s still possible to live comfortably in retirement — even in major U.S. cities — but you’ll want to be prepared so that you can afford the rising costs, of course.

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GOBankingRates conducted a study to find out what the cost of living looks like this year in major cities across the country and also spoke with a finance expert to get his thoughts on what a comfortable retirement might look like in 10 years — and how to prepare.

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New York City

New York is a major U.S. city, but it’s also — unsurprisingly — an expensive one. The average annual cost of living there is nearly $95,000, including everything from housing to utilities to food. Given how expensive it is to live there, you’ll probably need a decent nest egg to get you through retirement without any major financial struggles.

Assuming an average inflation rate of 2.5% and a cumulative inflation rate of 28.01%, you’d need roughly $121,600 annually in 10 years.

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San Francisco

Over on the West Coast, San Francisco is another large city with a notably high cost of living. According to the data, it costs roughly $125,000 a year to live there. As with anywhere else, costs might be a little lower for those without a mortgage — which is good news for retirees who’ve paid theirs off.

In a decade, assuming the same inflation rates as before, you’d need roughly $160,000.

Los Angeles

According to RentCafe, the cost of living in Los Angeles is 50% higher than the national average — not to mention 8% higher than the state average. Housing, utilities, food, healthcare, transportation, and everyday goods and services are all more expensive there than in most other parts of the country.

The average U.S. household spends $61,334 a year, but in Los Angeles, the average annual cost of living is around $91,000.

Assuming the same inflation rates, you’d need about $116,000 a year to live comfortably in retirement.

Miami

Florida has long been a popular retirement destination, but places like Miami — while still quite popular and populous — do require a bit more money to live comfortably. On average, the annual cost of living there is a little over $74,000.

In a decade, that number could rise to about $95,000 a year.

Major U.S. Cities With a Lower Cost of Living (in 2024)

Of course, not every major U.S. city is going to be exorbitantly expensive. Here’s the current average annual cost of living in some of these locations, based on the GOBankingRates study.

• Raleigh, North Carolina: $55,455
• Minneapolis: $54,681
• Philadelphia: $51,599
• Tucson, Arizona: $48,715
• Indianapolis: $44,176
• Memphis, Tennessee: $41,039

Keep in mind that everyone’s needs in retirement are different, so you might end up requiring a different amount of money to live comfortably. Still, it helps to have a baseline.

Predicting the Cost of Living in 10 Years

So how can someone predict the cost of living in retirement a decade from now? It’s tricky, but possible.

“Predicting the exact cost of retirement in major U.S. cities a decade from now is challenging due to variables like inflation, healthcare costs, and changes in the housing market,” said Dennis Shirshikov, a finance professor at the City University of New York and the head of growth at Summer . “However, we can make educated estimates based on current trends.”

He used New York, San Francisco and Los Angeles to illustrate this point.

“In [these] cities where the cost of living is already high, a comfortable retirement could easily require $100,000 to $150,000 per year, adjusted for inflation,” he said. This estimate includes factors like healthcare expenses, housing costs and the general cost of maintaining a certain lifestyle during retirement.

Ways To Prepare For a Comfortable Retirement

Regardless of the current or anticipated cost of living, don’t let that deter you from retiring where you want to. Shirshikov gave a few ways to prepare for a comfortable retirement starting now.

• Contribute more to your retirement accounts. Having extra never hurts. “As retirement approaches, it’s crucial to maximize contributions to retirement accounts like 401(k)s and IRAs,” Shirshikov said. “Catch-up contributions can be particularly beneficial for those over 50.”
• Diversify, diversify, diversify. Portfolio diversification is key to balancing risk and growth over time, but you might want to focus more on stability as you approach retirement. “This might mean shifting from a portfolio heavily weighted in equities to one that includes more bonds or dividend-paying stocks, which can provide a reliable income stream during retirement,” he said.
• Prepare for healthcare. This is a major retirement expense, so set aside extra money to cover medical costs later in life. You can do this in many ways, such as through a health savings account.
• Consider moving somewhere else. If the cost of living is still a major concern, consider relocating to someplace a bit cheaper — either within the U.S. or abroad. “If staying in a high-cost city like San Francisco or New York isn’t essential, moving to a city with a lower cost of living can significantly reduce retirement expenses,” Shirshikov said.

Methodology: In this study, GOBankingRates analyzed major U.S. cities to find out how long $1 million will last during retirement. For this study, GOBankingRates assumes a person retires at 65 years old. GOBankingRates first found the [1] top 50 most populated cities by total population as well as the [2] population aged 65 and older as sourced from the U.S. Census American Community Survey. GOBankingRates then analyzed each city for a variety of factors, including [3] Grocery cost of living index, [4] Healthcare cost of living index, [5] Utilities cost of living index, [6] Transportation cost of living index, [7] Miscellaneous cost of living index all sourced from Sperling’s BestPlaces and multiplied by the [8] National average expenditure costs for someone aged 65 or older sourced from the Bureau of Labor Statistics Consumer Expenditure Survey to find the average expenditure cost within each city. The [9] average rental cost from December 2023 for each city was sourced from Zillow Observed Rental Index and added to the average annual expenditure costs to find the total annual cost of living. By dividing the $1 million savings by the total annual cost of living gives the years it would take to drawdown $1 million savings in each of the major US cities. All data was collected and is up to date as of February 7, 2024.

This article originally appeared on GOBankingRates.com : What a Comfortable Retirement in Major US Cities Could Cost in 10 Years