Can you really retire in America and only spend $100 a day? Â Turns out it’s a lot more possible than you might think.
When I startedÂ this recent study with AARP, I’d expected only about 20 or 30 U.S. cities would be this affordable. Â But I was surprised to discover that most U.S. metro areas have a low enough combination of housing prices and property taxes to meet this criteria.
So what are the best cities for a $100/day retirement?
Based on things like arts and culture, rich community and great restaurants, here’s the Top 10:
I’m assuming a 25% tax rate, which will reduce your yearly income of $36,500 to $27,375 spendable income. Â That’s $2,281 per month.
The Bureau of Labor Statistics uses a percentage of 31.5% for the housing component of the Consumer Price Index. Â That means that we have $719 per month for mortgage payments and property taxes.
I’m assuming a 20% down payment, which means that with current low interest rates, we can afford a house priced at $192,000. Â Of course, putting up the nearly $40,000 (20% of $192,000) for the down payment may be challenging.
As I mentioned above, I was surprised to find that 259 of the 379 U.S. metro areas and divisions have this low combination of housing prices and property taxes.
And hereâ€™s something else I discovered.Â Current housing prices are so depressed (and rental prices so high by comparison), that in only 12 markets (out of 379) is it cheaper to rent a 3-bedroom unit instead of paying the monthly mortgage payment and property tax for the median home.Â Of course, youâ€™ll still need to pay for insurance and maintenance after coming up with the down payment.
As you might expect, the twelve metros with rents lower than monthly house payments include places such as New York, San Francisco, Boston, and San Jose.
At the other end are places which have been slammed by the housing crisis, such as Miami, Phoenix and Las Vegas, where you can save $700 or $800 (or more) PER MONTH by owning your home rather than renting.
15 Replies to “Retiring on $100 a Day”
Hi Bert, Just a note about the ups and downs of the economic cycle. Having lived in Wyoming through at least 2 boom-bust cycles I know the importance of being sure you like the area prior to buying. Though I always wanted to move back to my homeland of New England, I got caught owning a home that lost over 50% of it’s value and took 15 years to recover!There were no government bailouts then. Now that I am retired, the climate in New England looks a little trecherous to stay year round.One wrong move can cost a lifetime if you honor your debts! Thanks for your good work!
Your comment makes a great point that I feel often gets overlooked. And that is, for every boom, there is also a correction that veers into a ‘bust’.
Even a boom can be disruptive when it results in high housing prices and super-low unemployment. In parts of North Dakota, the unemployment rate is only 0.7%! (at the time this reply is written)
I’m working on a new index of economic stability which will provide some warning before a local economy gets out of control.
Thanks for sharing your experience!
This is a very informative study and very worthwhile. I however have some concerns that I was wondering if you could address. 1) Was crime rate of the city considered? 2) Was the quality of neighborhood where the “affordable housing” is located looked into? 3) If this is about “retiring” then the availability of quality health care should be a serious consideration.
I am not trying to bash your study and quite the contrary find some of the locations interesting. I am just questioning the the level of criteria vs. the quality of neighborhood. I have lived on booth coasts (ca & nc) and know too well how some things seem attractive until after you live there for a while.
I look forward to your response.
Yes, I did consider each city’s crime rate. Basically, most U.S. cities have a reasonably-low level of crime, but there is a level at which it affects its quality of life.
And no, I didn’t look at the quality of individual neighbors for each city. In every city, there is a range of affordability and quality to choose from. We get to choose based on our wallet and preferences.
And you’re right, quality health care is very important, but it’s also very difficult to measure. Fortunately, there are new measurements and standards being instituted by the government which is helping me grade and rank each area’s health care resources. I did this for nursing homes and other senior living options as part of a study on The Best Cities for Seniors.
That’s certainly true, what you said about how attractive places may seem until we have a chance to live there. I only know that there is no perfect place, and every city I know has plenty of pluses as well as minuses.
Thanks for your comment,
Moved from Northwest Indiana (after retiring) to Las Vegas, Nev. After nine years the crime was getting just too much. Moved to Florida and have been here for a little over a year. The people are stupid, self-serving and horrible drivers. The whole state is just one big MOLD-POD. Going back to the mid-west as soon as possible.
I do remember from my visits that driving in Florida does have its challenges.
Good luck with your search, and let me know where you end up in the Midwest and how you like it.
bert, what about those of us who cant afford to buy a house? and those of us who cant afford $100.00 a day? those of us who might only make 14-1,600 a month on retirement? IF there is any retirement left by the time we are able to file or claim.????
You are so correct!
I must confess that when I did the study, living on a $100 a day seemed like a catchy concept and affordable too, given that the U.S. median household income is about $50,000 annually ($137 per day).
But I really blew it when I didn’t consider that $100 a day would be a luxury for so many people.
I did this study with the AARP, and was taken aback when I read the comments on their web site. So many readers spoke about being on a fixed or limited income.
Now that I’ve had a reality check, I will be doing another study looking for the best places which are affordable on a lower income, maybe based on each state’s minimum wage.
Any suggestions would be welcome.
what about those of us who cannot afford $100 a day.
I have to admit, I was really wrong when I thought $100 was easily affordable.
All I had to do was look at the minimum wage, which should be enough for a person to live on.
At $7.25/hr., that’s only $15,080 annually, and with no vacation. That’s less than half the $36,500 assumed in our study.
And nine states have no minimum wage laws or a rate below the Federal minimum (Minnesota, what’s up? I thought you were cool.)
I need to do another study, this time with the daily amount equal to eight hours of the minimum wage in each state.
That would be interesting.
this type of study would really help me a lot.
It’s about time they started posting real town and cities instead of stupid Florida or Arizona. To survive longer you need a real environment, not some plastic paradise.
The ‘sand states’ (Florida, Arizona, Nevada) certainly had their run, and now are suffering a massive hangover.
Those economic woes certainly impact their livability.
But really, I find things to love about all places around our great country. Every one is someone’s home, and dear to them, and each has something special about them.
My only comment on this article is that when I enter the yearly income of $36,500 into last year’s tax program, that $36,500 becomes only $27,000 taxable income (because of the $5,800 standard deduction and the $3,700 individual exemption) resulting in a federal tax of $3,629. (I didn’t consider state and local taxes because those are typically even smaller in comparison.)
So, shouldn’t the spendable income actually be $32,871 (=$36,500-$3,629) rather than $27,375? It’s not much, but it does give a few hundred dollars more per month to spend. (Or have I missed something in the scenario?)
Good point, Brian.
There are so many variables regarding taxes that I took the easy way, and figured a nice round 25% tax rate. I used this hefty rate to cover not just the federal income, but also the state and local income tax (if any), federal, state and local payroll taxes, state and local sales taxes (if any), and other hits to one’s take-home pay.
But I did find I was way wrong in one of my assumptions regarding this study, and I’ll have a blog post about it in the next week or two.