Retirement calculators lie—here’s what you really need based on where you’ll actually live
The $1.5 Million Lie
Every retirement calculator spits out the same answer: “You need $1.5 million to retire.”
But that number is useless without context.
Because retiring in San Francisco on $1.5M means:
- Annual safe withdrawal: $60,000
- Rent for 1-bedroom: $36,000/year
- Healthcare: $12,000/year
- Remaining for everything else: $12,000/year
- Result: You’re barely surviving
Meanwhile, retiring in Tampa on $1.5M means:
- Annual safe withdrawal: $60,000
- Rent for 2-bedroom: $18,000/year
- Healthcare: $9,600/year
- Remaining for everything else: $32,400/year
- Result: You’re living comfortably
Same $1.5M. Completely different lifestyles.
I analyzed cost of living across 50 US cities to show you what you ACTUALLY need to retire based on where you’ll live.
The Real Formula: 25x Annual Expenses (In Your City)
The 4% rule says:
- Withdraw 4% of portfolio annually
- Should last 30 years
- Therefore need 25x your annual expenses
The problem: “Annual expenses” varies wildly by location.
Let’s break down average retirement budgets by city type:
HIGH-COST CITIES:
San Francisco / New York / Boston
- Housing: $36,000/year (rent) or own outright
- Healthcare: $12,000/year
- Food: $9,600/year
- Transportation: $4,800/year
- Utilities: $2,400/year
- Entertainment/misc: $9,600/year
- Total: $74,400/year
- Net worth needed: $1,860,000
MEDIUM-HIGH CITIES:
Seattle / Denver / Austin / San Diego
- Housing: $24,000/year
- Healthcare: $11,000/year
- Food: $8,400/year
- Transportation: $4,200/year
- Utilities: $2,100/year
- Entertainment/misc: $7,200/year
- Total: $56,900/year
- Net worth needed: $1,422,500
MEDIUM CITIES:
Phoenix / Charlotte / Portland / Nashville
- Housing: $18,000/year
- Healthcare: $10,000/year
- Food: $7,200/year
- Transportation: $3,600/year
- Utilities: $1,800/year
- Entertainment/misc: $6,000/year
- Total: $46,600/year
- Net worth needed: $1,165,000
LOW-COST CITIES:
Tampa / Boise / Pittsburgh / Albuquerque
- Housing: $14,400/year
- Healthcare: $9,600/year
- Food: $6,000/year
- Transportation: $3,000/year
- Utilities: $1,500/year
- Entertainment/misc: $4,800/year
- Total: $39,300/year
- Net worth needed: $982,500
VERY LOW-COST AREAS:
Rural South / Midwest / Small Towns
- Housing: $9,600/year
- Healthcare: $9,000/year
- Food: $4,800/year
- Transportation: $2,400/year
- Utilities: $1,200/year
- Entertainment/misc: $3,600/year
- Total: $30,600/year
- Net worth needed: $765,000
The range: $765K to $1.86M depending solely on location.
The Biggest Variable: Housing (70% of Difference)
Housing is 70% of the cost difference between cities.
Three retirement housing strategies:
STRATEGY 1: Own Your Home Outright
Pros:
- No monthly housing payment
- Just property tax, insurance, maintenance
- Typical annual cost: $6,000-12,000
Cons:
- Capital locked up in home
- Less geographic flexibility
- Maintenance responsibilities
Best for: People settled in one location
STRATEGY 2: Rent Forever
Pros:
- No maintenance costs
- Full flexibility to move
- Can arbitrage to cheaper locations
- No capital locked up
Cons:
- Monthly payments forever
- Rent increases over time
- No equity building
Best for: People who value flexibility or plan to move
STRATEGY 3: Geographic Arbitrage
The strategy:
- Retire in low-cost location
- Rent for $800-1,200/month
- Save $1,000-2,000/month vs expensive city
- Use savings for travel
Example:
- Retire in Medellin, Colombia: $1,200/month for nice apartment
- vs San Francisco: $3,000/month
- Savings: $1,800/month = $21,600/year for travel
- Visit expensive cities as tourist, live somewhere cheap
Best for: Adventurous retirees without location constraints
The Healthcare Wildcard (Biggest Unknown)
Healthcare costs by state vary dramatically:
HIGHEST COST STATES:
Alaska: Average healthcare: $15,000/year per person Wyoming: $13,200/year West Virginia: $12,800/year South Dakota: $12,400/year
LOWEST COST STATES:
Hawaii: $7,800/year Utah: $8,200/year Arizona: $8,600/year Idaho: $8,900/year
The difference: $7,200/year or $180,000 over 25-year retirement
Healthcare considerations before 65 (no Medicare):
ACA Marketplace Plans:
- Income under $40,000: Heavy subsidies, may pay $100-300/month
- Income $40,000-60,000: Moderate subsidies, $300-600/month
- Income over $60,000: Minimal subsidies, $600-1,000/month
Strategy: Keep reported income low in early retirement to qualify for subsidies
Healthcare considerations after 65 (Medicare):
Standard Medicare costs:
- Part B premium: $174.70/month ($2,096/year)
- Part D (prescriptions): $40-80/month
- Medigap/Supplement: $150-300/month
- Total: $5,000-7,500/year
Plus:
- Deductibles: $1,600-2,500/year
- Copays: $500-1,500/year
- Dental/vision (not covered): $1,000-2,000/year
Realistic total: $8,000-12,000/year
State Taxes Matter More Than You Think
States with NO income tax:
Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming
Impact on retirement:
- $60,000 annual withdrawal
- 5% state income tax: $3,000/year
- Over 30 years: $90,000 saved
States that DON’T tax retirement income:
Illinois, Mississippi, Pennsylvania (don’t tax pensions/401k/IRA withdrawals)
States that tax Social Security:
Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, West Virginia
Optimization strategy:
- Retire in no-tax state
- Establish residency
- Do Roth conversions during low-income years
- Save $50,000-100,000+ in lifetime taxes
The Real Numbers: What $1M Gets You
Let’s compare what a $1,000,000 retirement portfolio provides:
SAN FRANCISCO:
- 4% withdrawal: $40,000/year
- After housing ($36,000): $4,000 remaining
- Verdict: Not enough, need $1.8M+
AUSTIN:
- 4% withdrawal: $40,000/year
- After housing ($24,000): $16,000 remaining
- Verdict: Tight but possible
PHOENIX:
- 4% withdrawal: $40,000/year
- After housing ($18,000): $22,000 remaining
- Verdict: Comfortable
TAMPA:
- 4% withdrawal: $40,000/year
- After housing ($14,400): $25,600 remaining
- Verdict: Very comfortable
RURAL TENNESSEE:
- 4% withdrawal: $40,000/year
- After housing ($9,600): $30,400 remaining
- Verdict: Live well
The same $1M provides poverty in SF, luxury in rural areas.
The Climate Factor (Often Ignored)
Climate affects retirement costs through:
Hot climates (Arizona, Texas, Florida):
- AC costs: $200-400/month summer
- Higher insurance (hurricanes, heat)
- But: Lower heating costs
Cold climates (Montana, Minnesota, Maine):
- Heating costs: $200-500/month winter
- Snow removal: $500-1,500/year
- Higher home maintenance
Moderate climates (California coast, Pacific Northwest):
- Lower utility costs
- But: Higher housing costs offset savings
The sweet spots:
- Moderate climates with low cost of living
- Examples: Asheville NC, Chattanooga TN, parts of New Mexico
International Retirement (Ultimate Arbitrage)
Popular retirement destinations:
PORTUGAL:
- Lisbon: $2,500/month comfortable lifestyle
- Smaller cities: $1,800/month
- Needed: $540,000-750,000
- Pros: EU access, good healthcare, English-friendly
- Cons: Language barrier, distance from family
MEXICO:
- Playa del Carmen: $2,000/month
- Smaller towns: $1,200/month
- Needed: $360,000-600,000
- Pros: Close to US, great weather, affordable healthcare
- Cons: Safety concerns in some areas
THAILAND:
- Chiang Mai: $1,500/month
- Bangkok: $2,200/month
- Needed: $450,000-660,000
- Pros: Ultra affordable, excellent healthcare, great food
- Cons: Far from US, visa requirements, cultural adjustment
COLOMBIA:
- Medellin: $1,800/month
- Cartagena: $2,000/month
- Needed: $540,000-600,000
- Pros: Great weather, affordable, improving safety
- Cons: Spanish required, distance
The math on international:
- Live on $24,000/year vs $60,000 in US
- Savings: $36,000/year
- Need $900,000 less in retirement savings
Your Personal Retirement Number Calculator
Step-by-step to find YOUR number:
STEP 1: Choose your retirement location
- Research cost of living
- Consider proximity to family
- Factor in climate preference
- Account for healthcare access
STEP 2: Build your budget
- Housing: $_______/month
- Healthcare: $_______/month
- Food: $_______/month
- Transportation: $_______/month
- Utilities: $_______/month
- Entertainment: $_______/month
- Total monthly: $_______
- Total annual: $_______ × 12
STEP 3: Add 20% buffer
- Annual budget × 1.20 = Your needed annual income
- (Accounts for unexpected expenses, inflation buffer)
STEP 4: Multiply by 25
- Annual budget × 25 = Your FI number
- This is what you need invested
STEP 5: Subtract guaranteed income
- Social Security: $_______/year
- Pension: $_______/year
- Rental income: $_______/year
- Total guaranteed: $_______
- Your FI number minus guaranteed = Gap you need to fill
Example:
Living in Boise:
- Annual budget: $42,000
- Plus 20% buffer: $50,400
- Times 25: $1,260,000 needed
- Minus Social Security: -$24,000/year = -$600,000
- Actual needed: $660,000
Tracking your retirement across multiple accounts and locations requires seeing the complete picture. Richify consolidates all your retirement accounts—401(k), IRA, HSA, taxable—showing exactly how close you are to YOUR retirement number based on YOUR location.
The Geographic Arbitrage Strategy
The power move:
Phase 1 (Age 25-50): Earn in expensive city
- Work in San Francisco, NYC, Seattle
- Earn $150,000+
- Live frugally, save 40%
- Accumulate $1,000,000-1,500,000
Phase 2 (Age 50-60): Move to medium-cost city
- Relocate to Austin, Denver, Charlotte
- Continue working remotely or part-time
- Lower expenses by 30%
- Accumulate to $1,800,000
Phase 3 (Age 60+): Retire to low-cost area
- Move to Tampa, Boise, or international
- Live on $40,000-50,000/year
- Money lasts forever
- Optional: Snowbird between locations
This strategy maximizes earning potential while minimizing retirement costs.
The Bottom Line
The $1.5M retirement myth ignores the most important variable: location.
The reality:
You need $765K-$3M depending on where you retire.
San Francisco: $2.5M-3M minimum Medium cities: $1.2M-1.6M Low-cost areas: $750K-1M International: $400K-900K
The fastest path to retirement isn’t saving more—it’s choosing where you’ll retire.
Moving from San Francisco to Tampa cuts your FI number by $1.2M.
That’s 15 years of saving at $80K/year.
Or you could just move.
Your choice: Save for 30 years in expensive city, or save for 15 years and retire somewhere affordable.
Geography is the most powerful retirement variable nobody talks about.
Choose wisely.
Your retirement number depends on location. Richify tracks your net worth and helps you model retirement scenarios in different cities. See exactly what your savings will support where you want to live.
Leave a Reply