Where $1 Million Runs Out Fastest

Plan With The Tax Man

A million dollars is a goal that many people strive to earn for their retirement nest egg, but how far can that lump sum actually carry you? Today we will be looking at an article that breaks down how far a million dollars go in various states.

CNBC Article: https://www.cnbc.com/2022/12/17/states-where-1-million-dollars-retirement-savings-runs-out-fastest.html

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

----more----

Transcript Of Today's Show:

Speaker 1: Back here for another edition of Plan with the Tax Man with Tony Morrow. We are into early February here on the podcast, and we are going to do a fun little episode here on where a million bucks runs out the fastest. We'll put a link to this article on the show notes, but this will be a fun episode to look at this article that was written just before it was written in 2020, and we'll take a look at how it breaks down different states for how far a million bucks will go. This is kind of a fun little exercise, especially for those folks who think, "Well, I need a million dollars, or if I don't get to the million, I can't retire." Well, a million might not get it done in some places, and it might be just fine in others. So that's the point of the conversation. Tony, what's going on, my friend? How are you?

Tony: I'm doing good. It's tax season here. February, always the coldest month for us, and so it's just kind of work.

Speaker 1: That's true. That is true. I teed up on our previous podcast we were going to get into the Secure Act 2.0 passing there on December the 30th, I believe is when it went through of '22. We still got some more stuff we're breaking down. We're going to talk about that probably on the next episode, next episode or two. So make sure you tune back in for all the changes there. Of course, as always, if you've heard some things about the Secure Act changes and you need to make sure you reach out to Tony and have a conversation with he and his team just to make sure, especially around the concept of RMDs. We'll touch on that. Just real quick, Tony, one of the big takeaways, there was a lot of stuff in the new Secure Act 2.0 changes, but they moved the age for required minimum distributions to 73. The short of it is if you've already started taking RMDs, you're stuck taking them, so just keep doing it. But if you were turning 72 in 2023, sometime early this year, you can now wait until you're 73. So you do have a little reprieve. But again, please double-check with your qualified professional before you take any action, and then we'll break down all the rest because eventually it's going to 75 and so on and so forth.

Tony: Yeah, it's going to be phased in. Yep.

Speaker 1: Yeah, so we'll talk about some more of the stuff on that, but I wanted to kind of share that with folks real quick. All right, so let's talk about this fun article here. This was done by... Who did this?

Tony: Well, CNBC put it out, but yeah.

Speaker 1: Yeah, CNBC put it out, but Go Banking did the analysis. Based off the US Department of Labor Statistics. This is a breakdown of where, and again, we'll put the link in there so you can kind of see the color coding, but how many years would a million dollars get you in retirement savings in certain states? I don't think the top three are really shocking that are the worst for how long it's going to last. I imagine anybody could interchange them and think, well, it's going to be Hawaii, New York, and California, and it is. The top three are those. Hawaii with a whopping 11 years, Tony. So if you got a million bucks and you want to retire in Hawaii, if you got a longevity ahead of you, the million dollars is not going to do it.

Tony: Not going to go very far. And I love Hawaii and I go there every five years, and I would love to retire there, but... Well-

Speaker 1: You're going to need a lot of money.

Tony: I need a lot. It's just not going to last that long. And I'd probably go crazy because I would go...the island. But it is interesting because I think that million dollars we talked about at last episode about that, that's kind of that sweet spot. Everybody always kind of shoots for sure. I'm a millionaire and I'm good now once I have a million. And I think if you read through this article, it really gives some eye-opening things. It depends a lot on where you live and-

Speaker 1: And how you live.

Tony: And how you live.

Speaker 1: Yeah.

Tony: So I do think that these top three on the highest side don't surprise me. I think some of the other ones that are especially like Alaska and then maybe the eastern [inaudible 00:03:42].

Speaker 1: I expected Alaska to be high too, because you got to import a lot of stuff, right?

Tony: That's true. You do. Yeah. Yeah, you do.

Speaker 1: It does tend to be coastal. So when looking at this map, folks, if those of you decide not to check this out, we'll just kind of talk you through it. Basically, most of the east coast and the west coast fall in that million dollars won't go so far category. I'm sorry, with Vermont being the best of the high side. And 18 years, a million dollars if you're out in Vermont, will last about 18 years according to this. What were you going to say?

Tony: Well, I was just going to say speaking of the coast and then Hawaii, I always kid people saying that that's the fun tax, the sun tax, but that's where people like to flock to.

Speaker 1: Sure.

Tony: And so a lot of population and tends to drive prices up. So there's some reality to that. I do want to jump to the other side because my infamous state, Iowa, is number five on the list of the lowest places or where the money will go the furthest.

Speaker 1: Almost 24 years. Pretty good,

Tony: Pretty good. But notice most of those states you got for those, just listening, you got Oklahoma, Kansas, Midwestern to Southern.

Speaker 1: The Heartland.

Tony: Indiana, the Heartland, Tennessee, Arkansas, I mean the best one of course. But I believe that's Mississippi, right? MS?

Speaker 1: Is that Mississippi or Missouri? I think it is. I think it's Mississippi. MO, that's right. Yeah, it's Mississippi.

Tony: But Mississippi, it's not a place that I would think of going, but I mean it's a pretty good sized state. But I think the point of all this really is that depending on where you decide to retire, it's going to last you a lot longer if you're just taking this million. Cause I think they based this on the state's cost of living expenses for housing. If you're going to take that money and live off of it it's going to last you for quite a while.

Speaker 1: I mean, I was pleasantly surprised to see Georgia so low down, if you will. So 24 years basically for Georgia, which is a hugely popular state. Atlanta is a massive city, obviously. And I imagine that states that are probably interesting, Tony, because Atlanta probably is more expensive than Marietta, right? So the further away from the metropolis as you are in some of these states, probably the more affordable it goes. Michigan was on the lower part at 23 and a half years. Again, a pretty populous state, a lot of heavy metro centers. Then the states that aren't mentioned, they kind of fall into this range of 19 to 23, 22-ish. And that's states, Texas, kind of surprising that Texas falls into that kind of 19, that right around 20 years. That's where my North Carolina, where I'm at, falls into place. The Carolinas both fall around 20 years. So Texas kind of surprised me a little bit because so many people have been moving there. Now granted this is two years old, this survey, and that doesn't probably take into account the inflation obviously that we saw happen in the last year.

Tony: I think Texas, even though it's not the considered the beach towns in the states, but it is so large and there's so much-

Speaker 1: Massive cities. I mean Houston and Dallas are just... San Antonio's not massive, but there's a lot of people and they're really... San Antonio's a great place to visit and live as well. I have some friends there. So when you're looking at this kind of thing, you're kind of saying, okay, I've got this retirement goal in mind. And we talked, I don't know, probably a few months back about does it make it sense to move to a state that's maybe tax advantaged or that the cost of living. If you live in New York, a lot of people moved to Florida. So Florida falls in that mid-category as well, folks around that 19, 20 year mark. There's a huge reason why people moved from New York to Florida. And it's not just the cold.

Tony: No, it's not. Because I was down in Arizona golfing in November, and a guy who's lived there a long time saying they get a lot of Californians selling these massive real estate places and taking a ton of cash and then moving to Arizona, which it's not on the lowest end of the spectrum-

Speaker 1: It's around the 19 years. Yeah,

Tony: Banking a lot of money, the cost to live is less. It's still got the warmth and you don't have the beaches. I think that makes a lot of sense. But I think another thing in this article is for those that click on the link and read down, CNBC's got a good little retirement planning tool and it's highlighted about halfway down that really you can click on it, punch in a few basic things. You don't even need to grab anything. You just right off the cuff, and it's going to tell you how much you're going to need in retirement. Now, there's a lot more to it than that. That's when you need to get with your advisor and figure out, well, I'm going to be well short, what do we do? But it's an interesting little tool that most advisors, I mean, we have more complex things, but those are more inputs and more time. But I'd check that out if I were you, and of course the biggest thing that stands out to me, which we recommend too, is it's right in about the middle of the article. It says most investors are recommended to say between 12 and 15% of their salary, and many do not. It's down around, well, I get the 4% because that's what my employer matches. Well, that's good that that's better than nothing, but you need to keep going. And it gives you some ideas there in the article as well to a couple of tips, because-

Speaker 1: That's a great point, Tony. That 12 to 15%, somebody hears that and goes, there's no way. I can't survive, especially right now with the inflation we've all been dealing with. I can't survive on putting away 15% for retirement. What are you crazy?

Tony: What I tell him, I get a little sassy with him and say, oh, you can do it. You just have to re-engineer what you're spending your money on. And as Dave Ramsey's saying goes, I think in his book he says have to live like no other. So someday you can live like no other, but you got to take that to heart. You have to put this first and then engineer the rest of your life. But I shouldn't say all, but a lot of people do the exact opposite to get their life all engineering. Now I only got this much to say for retirement. So that's all it gets.

Speaker 1: Yeah, no, that's some good points because it's certainly interesting to figure out what it is that you need to do, how you need to do it. And a lot of it comes back to, we talk a lot on here, Tony, about X's and O's and you like to make the joke that sometimes it's easy for advisors to say, well, it kind of depends and you don't get super specific because everybody's different. So we try to play devil's advocate and kind of go a little bit each way, but the concept of how much you needed a total nest egg really does play in the factor how you live and where you live. Because even if you're in the same area, so let's just go with a lower state, one of the states that was, let's say 23 years, you're in someplace like Indiana, for example, or whatever. And if you're living in Indianapolis and you're going out and doing a lot of things and you're very active in your lifestyle, it's going to be completely different than if you live in Terre Haute and you do virtually nothing, or you live in the middle of nowhere. Or even in my state here in North Carolina, living in Charlotte and doing a lot versus where I live in the country is completely different costs of living. So how you live and where you live plays a huge factor in how much you're going to need for retirement.

Tony: It sure does. And I'm going through it with really right now with my own son, because he's out in Denver and they're young, got married. Very, very pricey. And they're actually all of a sudden looking... Houses out there, I mean, for what they are making at the time, boy, they just don't get much. And they're looking at them back here in the Midwest where they're both from and they're scratching their heads saying, boy, may, maybe Iowa or South Dakota, somewhere a little closer to home in the Midwest, our dollar's are going to go a lot farther. And they're not even retired. I mean, they're 26, 27, they just turned 27. So it's not about just the retirees, it's about I'm not advocating moving and getting out of your state.

Speaker 1: Sure. Right.

Tony: It's something to think about.

Speaker 1: Yeah, you definitely got to factor all these things in there, and depending on where you live, the snowbird thing certainly plays into a factor, even people in Iowa. Sure. Right?

Tony: Oh yeah. Oh yeah, Carrie'd love to get out of here.

Speaker 1: Right? Oh, it's cold. So think about that. And that's one of the reasons why Texas, Florida, so Texas and Florida are in that kind of the same range on this particular article of around right around 19, 20 years, where Tennessee is around that 23 year mark. Those three states have been very, very popular the last couple of years because of the income tax.

Tony: Yes, correct.

Speaker 1: And of course, the temperature, the weather. And then now this, the million dollars, the length that goes, certainly makes it appealing.

Tony: It does. And what Iowa's done, because we're in retirees moving here, not that appealing, or even the ones that have been here all their lives and want to get out is Iowa's just passed a law saying that the retiree income, which is social security, and then pensions and stuff, is not taxable at the Iowa level.

Speaker 1: Oh, okay.

Tony: And Trying to keep people here a little bit.

Speaker 1: And some enticement. Yeah.

Tony: A little bit of enticement. I mean, the weather is a big one as you get older, to the negative, I might add. But all these states are trying to keep people and attract people for different reasons because as we all know, I mean, Iowa's going to get their money somehow. It's not income tax, it's somewhere else.

Speaker 1: That's the thing of if you were moving someplace like Tennessee just for the tax break, that's probably the wrong decision because they're going to get you. Or Florida even, so you moved to Florida, but just for the taxes, and you're like, okay the sun's a bonus. It's still expensive to live, and it's going to be more expensive to live in Miami than it is to live in Gainesville.

Tony: Right. Exactly.

Speaker 1: They're going to get you one way or the other, local level, salt taxes, as you know they're called. To your point about Colorado, a good friend of mine moved from North Carolina to Colorado, and he is like, oh, some things are really great. And he's like, he couldn't believe what it did to his car insurance and just tagging his vehicle. He was like, holy moley.

Tony: And that's the kind of stuff, I mean, that's direct cost of living stuff there.

Speaker 1: Exactly, and that affects your total income outcome.

Tony: It does. And that's the whole point of this article, and obviously it's a slant a little more to retire there, but it's something to think about. I mean, the retirees have a little more to think about than just like somebody my son's age who's just working there. But it is interesting.

Speaker 1: Well, and that's where a strategy and a plan comes into place. And of course, when you're putting that stuff together, you can strategize for some different things. You can say, you can sit down with your advisor, you can talk with your loved one and say, where do you want to retire? And we say, oh yeah, we don't want to live in Iowa. We do want to live in Florida, or whatever. Well, you can still work with Tony and start strategizing for that, because Tony, you got clients all over the country.

Tony: We do. Yeah.

Speaker 1: So it's possible to go through and start calculating and planning instead of just winging it. You don't want to just wing this kind of thing. So it's fun little article. Again, we'll link it into the show notes if you want to check it out. We covered most of it here, but certainly ask yourself that question, where do you want to tire?Where and how do you want to live in retirement can go a long way towards getting that whatever that total number is or that total goal. And as Tony and I said on the prior podcast, really the million dollars probably shouldn't be the concept. It should really probably be how much income do you need to afford the lifestyle you want? So as always, don't forget, subscribe to us on Apple, Google, Spotify, Plan with the Tax Man. You can type that into the search box at any of those apps, or you can just find all the information you're looking for at yourplanningpros.com. That is yourplanningpros.com, where you can check out the tools, tips, and resources Tony has on the website. Schedule some time to talk with he and his team and get started today. As I mentioned, he's a CFP, CPA and an EA with 27 plus years of experience, so great resource for you to tap into. If you need some help and you're not already working with him, reach out to Tony Morrow today. Tony, my friend, thanks for hanging out, have yourself a great day, and enjoy yourself. I'll talk to you in a couple weeks.

Tony: All right, we'll see you next month.

Speaker 1: All right, we'll talk to you next time here on Plan With the Tax Man, with Tony Morrow.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.