Although many savers look to accumulate $1 million in their retirement nest eggs, the reality is that $1 million can go a lot further in some states than others. This is particularly important to understand if you are looking to retire early.
The Midwest, generally speaking, is a more affordable area of the United States, so it can be a good option for early retirees looking to make their retirement money last.
GOBankingRates reviewed data from the Bureau of Labor Statistics and the Department of Housing and Urban Development to determine how long $1 million would last in Midwestern states, defined as Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
How Long Will $1 Million Last in the Midwest?
The 12 states listed above were lumped together as “the Midwest” in order to find an average cost of living for the region. Based on the data, the average monthly rent for a one-bedroom apartment is $638, while the average monthly cost of living, which includes transportation, health, utility, grocery and miscellaneous costs, is $3,378. Combined, these two figures represent a total average monthly expenditure of $4,016.
Based on those figures — and neglecting any investment gains that may be earned on that money — $1 million will last 20.75 years on average in the Midwest.
Is the Midwest a Good Place To Stretch $1 Million in Retirement Savings?
Overall, the cost of living is quite low in the Midwest, particularly when compared with more expensive states such as Hawaii, Alaska, California and New York. In fact, moving from these high-cost states to the Midwest is often a recommendation of financial planners to help retirees stretch their money.
How Can You Make Your Retirement Money Last Longer?
Whether you’ve recently moved to the Midwest or have lived there your entire life, there are still plenty of ways to help your retirement money last longer. Here are just a few.
Invest Prudently
Perhaps the best way to give your retirement money extra life is to invest it prudently. While $1 million can still last over 20 years in the Midwest, you’re likely going to need it to stretch for 30 years or more if you retire early. Consult with a financial advisor to devise an asset allocation that can offer you some long-term growth without putting your principal at too much risk.
Downsize
Many retirees — particularly those with nest eggs of $1 million or more — often live in larger homes than they need. If you are single or just a couple, you may no longer need a three- or four-bedroom home, and moving to a smaller residence can save hundreds or thousands of dollars per month. If you own your home outright, selling it and moving to a smaller place can provide you with a potentially significant amount of equity that you can save or invest.
Relocate — Even Within the Midwest
Even though the Midwest is defined as a single region for the purposes of this study, there are still wide cost variations across it. Living in the heart of a big city, such as Chicago, always will cost more than living in the more rural parts of a state.
Get a Roommate
Roommates can share expenses and reduce your monthly costs by as much as 50%.
Pick Up a Side Gig
Any type of additional income you can draw on the side will help your retirement nest egg last that much longer.
