Done by 60: Final Home Destination


People often plan for retirement based on their current lifestyle, which includes the cost of living in their current city. How much sooner could you retire if you moved to a city with a lower cost of living once you stopped working full time? As it turns out, the cost of staying in that big, expensive city (I’m talking to you, San Francisco and New York) can easily hit six figures and add several years to your work life.

Save Less?

Let me again define “retirement” as the point at which work becomes optional. If you’re eager for this to happen earlier (say, age 60), then it benefits you to move to a city where your big-ticket costs will be lower. A few examples of these costs are housing, food, medical and transportation. Some states, such as Alaska, Oregon and Delaware, have no sales tax, and others no income tax, such as Florida, Alaska and Washington.

Cost-of-living calculators, like the one offered by AreaVibes, are a good place to start. I found that moving from cities like Los Angeles or San Francisco to cities such as Portland, Austin, Boise or Palm Springs could result in a cost reduction from as little as 14% to as much as 48%.

Let’s imagine, for the sake of this exercise, that you could reduce your costs by 20%. If you need your portfolio to cover $100,000 worth of annual spending in your current city, and relocating would convert that need to $80,000, what would your nest egg have to be worth? Using my 5% “safe” withdrawal rate rule, you would need a $2 million portfolio if you stay and only $1.6 million if you move—that’s $400,000 you won’t need to have in your portfolio. To put it another way: What would you do if your current city tried to levy a $400,000 tax in order for you to be able to stay there during your retirement years?

Plan Early

A smaller nest egg target means that you can reach a state of financial independence sooner. Ask your financial advisor to run a projection to see what’s possible while you’re in your 40s or 50s so that you can plan ahead for it. And don’t forget to research the nonfinancial aspects of your future retirement cities—climate, geography, air quality, culture, health care, safety, etc. Find Your Spot is a fun city-matching website that’s worth exploring.

I’ve often heard that people spend more time planning for a vacation than they do for retirement. So think of this as planning for a long, post-retirement vacation.

Happy planning,