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Saving $2 million for retirement can be a huge financial milestone. However, how long that amount lasts is not the same everywhere. Your retirement nest egg's longevity is highly dependent on where you live, thanks to varying costs of living across the United States.

A recent analysis by GOBankingRates reveals the surprising impact of location on retirement savings. Retirees in some states can stretch $2 million for decades, while in others, it might not last as long as you'd hope. This analysis factors in typical annual expenses like housing, transportation, food, healthcare, and utilities. It also includes the effect of Social Security payments, making it a well-rounded view of what retirement could look like across different regions.

Why Does Location Matter?

Housing costs are the biggest factor. In states with expensive urban areas like California, New York, or Massachusetts, the cost of housing alone can set retirees back by an additional $30,000 a year compared to areas with lower living expenses. As such, retirees in high-cost states need more savings to maintain a comfortable lifestyle.

The Influence of State-Based Cost of Living

To get a more accurate picture, GOBankingRates used data from the Bureau of Labor Statistics’ 2023 Consumer Expenditure Survey. They adjusted this data by using the Missouri Economic Research and Information Center’s cost-of-living index, which accounts for differences in living expenses across the states.

The study found that while $2 million seems like a hefty sum — and only about 1.8% of households manage to save that much — it could provide a comfortable retirement for most people. The analysis showed that in all but three states (Hawaii, Massachusetts, and California), $2 million could cover 35 years or more of retirement. This amount is in line with what many financial experts suggest as an ideal retirement savings target — around $1.5 million.

How Long Does $2 Million Last in Each State?

Here's a breakdown of how long $2 million would last in each state, considering annual living costs after factoring in average Social Security benefits.

Best States for Retirement: Where $2 Million Goes Furthest

• West Virginia: $27,803 annually – $2 million lasts 72 years
• Mississippi: $29,426 annually – $2 million lasts 68 years
• Kansas: $28,945 annually – $2 million lasts 69 years
• Oklahoma: $29,666 annually – $2 million lasts 67 years
• Alabama: $30,207 annually – $2 million lasts 66 years
• Arkansas: $30,327 annually – $2 million lasts 66 years
• Missouri: $30,327 annually – $2 million lasts 66 years
• Tennessee: $30,928 annually – $2 million lasts 65 years

These states have the lowest living costs, allowing your retirement savings to go further. West Virginia, in particular, is the most generous, with $2 million lasting an astounding 72 years.

States Where $2 Million Won't Last as Long

• Hawaii: $87,770 annually – $2 million lasts 23 years
• California: $63,795 annually – $2 million lasts 31 years
• Massachusetts: $65,117 annually – $2 million lasts 31 years
• New York: $50,997 annually – $2 million lasts 39 years
• Alaska: $50,997 annually – $2 million lasts 39 years

In these states, high housing costs, utility bills, and living expenses mean that retirees will need more than $2 million to maintain their current lifestyle for a long period. Hawaii stands out with the shortest duration, as $2 million would only cover about 23 years of retirement living.

Average U.S. States

For the average retiree living in states with a moderate cost of living:

• Florida: $38,379 annually – $2 million lasts 52 years
• Georgia: $31,829 annually – $2 million lasts 63 years
• Illinois: $34,233 annually – $2 million lasts 58 years
• Michigan: $32,310 annually – $2 million lasts 62 years
• North Carolina: $35,495 annually – $2 million lasts 56 years
• Virginia: $37,237 annually – $2 million lasts 54 years

In these states, $2 million offers a decent stretch, providing over 50 years of comfortable living for retirees. While it won't last forever, you can rest easy knowing that your savings will provide ample support.

How These Findings Can Help You Plan Your Retirement

If you’re planning for retirement, it’s crucial to understand how the cost of living in your desired location will impact your savings. Whether you are considering moving to a more affordable state or you’re already settled in a high-cost area, knowing the numbers will help you adjust your savings goals and strategies.

For example, living in high-cost areas like California or New York may prompt you to boost your retirement savings by a significant amount, while relocating to states with lower living costs like West Virginia or Mississippi could extend the lifespan of your savings and give you more flexibility in your retirement years.

Additional Factors to Consider

While this analysis highlights the importance of location, it’s also important to consider other factors such as inflation, healthcare costs, and changes to Social Security. The cost of living is just one part of the equation; being proactive and adjusting your savings plan to account for other potential expenses will ensure you’re well-prepared for retirement.

• Healthcare Costs: As you age, healthcare costs typically increase. Consider investing in health insurance, long-term care, and other retirement benefits to offset this expense.
• Social Security: This can be a vital income source, but it may not fully cover your living expenses. Understanding the amount you can expect from Social Security and how it fits into your overall plan is key.

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With careful planning, $2 million can be a solid foundation for retirement, but how long it lasts will depend largely on where you live. Understanding the cost of living in your state and adjusting your savings goals accordingly will help ensure that your nest egg lasts as long as you need it to. If you’re considering retirement in the near future, think about how much more you might need to save — and whether relocating to a more affordable state is a viable option for your retirement lifestyle.

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