Posted by: Richie Bernardo

After toiling in the workplace for decades, it seems only natural to expect financial security in our golden years. But few of us can look forward to a cushy retirement. According to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey, six in 10 workers reported feeling at least somewhat confident that they’ll have adequate finances to retire comfortably, but only 18 percent reported a high level of confidence. Nearly four in 10, in fact, have little or no retirement savings whatsoever. Many are even worried about covering basic living expenses once they leave the workforce.

If such a large proportion of American workers cannot grow a nest egg for their future, what other options provide a pathway to a comfortable retirement? For some, the only solution is to keep working. The EBRI survey found that four in 10 workers today expect to retire at age 70, as opposed to the median expected retirement age of 65. The alternative? Relocate to an area where you can stretch your dollar without sacrificing your lifestyle.

To help Americans plan an affordable retirement while maintaining the best quality of life, WalletHub’s analysts compared the retiree-friendliness of the 150 largest U.S. cities across 40 key metrics. Our data set ranges from cost of living to retired taxpayer-friendliness to availability of recreational activities. Read on for our findings, expert retirement advice and a full description of our methodology.

If you’re considering retiring out of state, make sure to check out WalletHub’s “Best & Worst States to Retire” ranking, too.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

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Overall Rank	City	Total Score	‘Affordability’ Rank	‘Activities’ Rank	‘Quality of Life’ Rank	‘Health Care’ Rank
148	Newark, NJ	34.45	123	98	95	140
149	Worcester, MA	32.85	120	136	138	122
150	Providence, RI	29.96	145	88	119	148

Ask the Experts

People plan for retirement at various stages of their lives. But regardless of one’s age, general wisdom has it that planning ahead and as early as possible can help secure a financially cozy retirement. To expand the discussion, we asked a panel of experts to share their advice on various factors that prospective retirees should consider as well as retirement-friendly measures that city leaders can implement. Click on the experts’ profiles to read their bios and responses to the following key questions:

1. What financial factors should retirees take into consideration when deciding where to retire?
2. What are some tips for living on a fixed income in retirement?
3. What is the biggest mistake that people make when planning their retirements?
4. What percentage of income should you aim to replace in retirement?
5. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough?
6. In evaluating the best and worst cities to retire, what are the top five indicators?
7. Should attracting more retirees be a priority for local government? If so, what should they do?

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• Jia Wu Associate Professor & Chairperson of the Department of Accounting & Finance, and Director of Master Science in Accounting Program in the Charlton College of Business at the University of Massachusetts Dartmouth
• Wade Pfau Professor of Retirement Income in the Financial and Retirement Planning Doctoral Program at The American College of Financial Services
• Teddi Jo Paulson Assistant Professor of Financial Planning at the University of Jamestown
• Ryan Teeter Clinical Assistant Professor of Accounting Information Systems in the Joseph M. Katz Graduate School of Business at the University of Pittsburgh
• Mariette O'Malley Partner at O'Malley & O'Malley LLP and Adjunct Professor at the University of Miami
• Donald A. Hoy Associate Professor and Program Chair for Management at Benedictine College

Jia Wu Associate Professor & Chairperson of the Department of Accounting & Finance, and Director of Master Science in Accounting Program in the Charlton College of Business at the University of Massachusetts Dartmouth What financial factors should retirees take into consideration when deciding where to retire? The cost for housing, nursing home, property tax, insurance, and general labor cost in the local market. What are some tips for living on a fixed income in retirement? You need to cut expenses and spend the money wisely. Downsize to a small home. Try to take advantage of senior discounts. Make reasonable budgets, based on the fixed income. What is the biggest mistake that people make when planning their retirements? People tend to procrastinate and make their retirement planning too late. People should make retirement planning as soon as they start their first job. What percentage of income should you aim to replace in retirement? The general rule is 70-80%. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough? 85 for women, and 80 for men. Should attracting more retirees be a priority for local government and if yes what should they do? It really depends on which local government we are talking about. For areas lack of other business opportunities, senior living can become a revenue center. With more retirees coming to the town, their spending can generate many job opportunities for the local economy. In the meantime, retirees do not add any burden to local school systems, which is a usually a big ticket item for the local government. Wade Pfau Professor of Retirement Income in the Financial and Retirement Planning Doctoral Program at The American College of Financial Services What financial factors should retirees take into consideration when deciding where to retire? This is an excerpt from my book, “Reverse Mortgages: How to Secure Your Retirement with a Reverse Mortgage:”

• Availability of interesting leisure activities;

• Diverse transportation options;

• Access to quality health care;

• Agreeable climate and community;

• Access to family and friends;

• Ability to maintain social ties;

• Ability to age in place in your home;

• Housing prices;

• Costs of living and affordability of new location;

• State income taxes;

• State sales tax;

• State inheritance tax;

• Local property taxes and costs of municipal services;

• Other state tax rules regarding retirement income sources (e.g., Social Security).

What is the biggest mistake that people make when planning their retirements? They don't plan sufficiently for the long-term, as they may think they will work longer than they do, they think they will die at too early of an age, and this leads them to avoid making decisions that pay off with a long life, such as delaying Social Security benefits. What percentage of income should you aim to replace in retirement? The rule of thumb about this is about 80% of gross pre-retirement salary. But that rule of thumb has many unrealistic assumptions built in. This really has to be considered on a case by case basis. Try to figure out your budget in the years leading to retirement, and just think about how that budget might adjust post-retirement. You can then see what replacement rate this implies, but the replacement rate is not so important. Just focus on funding the budget. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough? Readers of WalletHub will live longer than the average American. More education, income, and wealth are all correlated with longer life expectancies. Readers in good health should seriously consider the possibility of living to 95 or 100. Teddi Jo Paulson Assistant Professor of Financial Planning at the University of Jamestown What financial factors should retirees take into consideration when deciding where to retire?

• Proximity to family;

• Transportation into/out of city (airline, bus route, train);

• Entertainment options -- restaurants, movie theaters, theatre, golf, pickle ball;

• College community -- cultural events, library resources, sporting activities;

• Senior friendly -- nursing homes, assisted living facilities, memory care facilities, income assistance housing. Senior center with activities, food services -- meals on wheels;

• Fitness facilities with indoor walking, swimming, fitness classes.

What are some tips for living on a fixed income in retirement?

• Look for free entertainment options. Utilize the senior center in your city, start or join a card club. Combine fitness and entertainment by joining a local fitness center. Look for a community garden plot.

• Sell your car. Focus on public transportation. Cities that focus on boosting their transportation systems help retirees live on less.

• Sell your home and rent something smaller. As individuals age, home maintenance becomes increasingly difficult. An otherwise appreciating asset (your home) can depreciate because of lack of maintenance. Interest rates are still very low, and this has helped keep real estate values high in many areas. The tax code also provides benefits for selling your home. An individual can exclude up to $250,000 in capital gain on the sale of their home, while a married couple can exclude up to $500,000 in capital gain. These gains can help fund your retirement.

• If you have minimal retirement assets and/or income, consider income-based apartments. Again, cities looking to attract retirees will focus on having income-assisted housing options.

What is the biggest mistake that people make when planning their retirements? Not saving enough is an answer you hear often. But why have individuals not saved enough? There are many reasons. They do not understand their retirement plans. Several years ago, large companies offered defined benefit plans. The payout at retirement was based on the number of years you worked for a company, your salary (usually the plans allowed you to take your highest “average” of a few years) and a multiplication factor. The plans were extremely costly, and very few companies offer them anymore. However, the current generation of retirees might have some small benefit from previous employment. New defined contribution plans have replaced the previously mentioned defined benefit plans. These plans put nearly all the “pressure to perform” on the employee’s contribution and investment choices. Employers do, usually, offer some type of matching contribution and it is very important that employees understand how it works and how to take full advantage of that option. Many individuals wait too long before committing to saving for retirement. “I have loans, kids, want to buy a house, etc.” -- there are a number of excuses (some legitimate, some not) you hear. The bottom line is that, by waiting too long, there simply is not enough time for your investments to grow and multiply. Retirement asset accumulation is largely a factor of time and the interest rate earned on your money. By waiting too long, you have eliminated one of the advantages available to you (time). Start saving early. Save at least enough to get your employer’s matching contribution. To continue with this theme of “time and interest,” many individuals are intimidated by investments, and either avoid them or invest too conservatively, thereby not getting a high enough rate of “interest.” This eliminates or reduces the second advantage of interest. Many retirement plans now offer an age-based investment option. Pick one that fits your age and seek the help of an investment advisor. Individuals, “sick and tired” of their jobs, are too set on retiring early. Since Social Security allows a reduced benefit at age 62, many individuals take this option. However, it is a permanently reduced benefit. Furthermore, it is far more difficult to go back to work in retirement, especially if you have to, than it is to continue a few more years in a position that you dislike. In my experience as a financial advisor, I fully believe that work is a privilege and earning money (even at a job you dislike) is far better than the constant worry of not having enough money. Retiring too early creates the following issues:

• Your retirement is longer, so your savings must last longer;

• You have eliminated some of your peak earning years and, consequently, eliminated a large of amount annual savings into your retirement plan, including the matching contribution from your employer;

• You have eliminated a few years of growth in your retirement plan;

• You are drawing from a smaller accumulated amount;

• You have longer to cover your own health insurance. Medicare is not available for individuals until age 65, even though you could draw Social Security as early as age 62 (60 if you are a widow or widower). If you leave employment, lose your health insurance and expect to cover that cost on your own, you will significantly deplete your retirement savings on that cost alone. Depending on what happens with health care, working for an employer that provides health insurance, even for a few more years, might be your best option for retirement.

People underestimate inflation (rising prices of goods and services, especially health care costs). If they see they have income from social security and a pension plan, combined with a small investment portfolio, and it appears these sources will provide an income to cover their current expenses, this may provide a false sense of security about the success of retiring early. However, pensions and social security have little or no adequate cost of living adjustments, so retirees see themselves losing purchasing power and growing “poorer” each year. The additional investment portfolio must be adequate to cover expenses plus inflation adjustments on the income from the pension and Social Security. What percentage of income should you aim to replace in retirement? You will hear the amounts of 60-80% of your pre-retirement income. This “replacement ratio” is less than 100% of your income because, at retirement, some expenses normally go away. For instance, while you are working, you are “earning” income. Earned income is subject to social security and Medicare tax. As an employee, you pay 7.65% of your earned income to Social Security and Medicare. Your employer pays 7.65% of your income on your behalf. If you are self-employed, you pay 15.3% of your income. At retirement, investment income, pension income, and Social Security are not subject to these taxes. Other expenses go away, as well. Typically, kids are out of the house (a big expense), your mortgage should be paid off, you don’t have to buy work-appropriate clothes. In my experience as a financial advisor, we would use approximately 75% as a replacement ratio when we were projecting retirement expenses for individuals and families that were 20 years, or so, from retirement. Since these individuals’ incomes will change significantly and expenses will also be substantially different than at retirement, it is suitable to “ballpark” the expenses start saving toward a realistic goal. The best answer to the question of how much to replace in retirement is, “How much income do you want to have?” When an individual or couple is closer to retirement (say, 5-10 years), they have a very good idea of what their actual expenses are, or will be in retirement. Then you can add in specific expenses, such as vacation, health care costs, to customize a savings plan based on the actual income goals. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough? There are many life expectancy calculators out there that take into consideration lifestyle, family history, etc. I like my clients to each take one of these “quizzes,” and then we will use this accordingly. We would then have a discussion about using an additional number of years as a cushion, and what number they believe makes sense to them. Should attracting more retirees be a priority for local government and if yes what should they do? Yes. As I indicated above, retirees tend to look for cultural events, sporting entertainment, public transportation and quality health care, among other things. Some of these attractions are also important to local colleges, particularly mid-sized liberal arts universities. Entertainment opportunities for retirees may also be important for attracting tourism. Joint efforts between the city, the economic development entities, and universities can help create an environment that is attractive to all of these classes of individuals. Ryan Teeter Clinical Assistant Professor of Accounting Information Systems in the Joseph M. Katz Graduate School of Business at the University of Pittsburgh What financial factors should retirees take into consideration when deciding where to retire? Every person has a different situation with different requirements, whether they pine for leisure, prefer to hole themselves up and watch television all day, or become engaged in their local community. In general, most people do not save enough money for retirement, and must therefore continue to work after retirement age to cover their costs. It doesn't help that costs for retirees are increasing more quickly than a fixed income can support. This is where communities play an important role. Health care costs also tend to negatively correlate with senior engagement (in other words, more involved seniors tend to also have fewer health issues, and thus, lower medical expenses, though hard to prove causality, since this is a chicken-and-egg problem). Should attracting more retirees be a priority for local government and if yes what should they do? Places like Disney World create a great environment for seniors to come and interact with young families and feel valued. Many come for a month or two a year, and then return home. Cruise ships, retirement communities (complete with medical staff and support), rival nursing homes in terms of cost, and providing much more enjoyment for seniors that fit that mold. Retirees benefit cities with medical centers through support services (which are often supplemented by the federal government). Mariette O'Malley Partner at O'Malley & O'Malley LLP and Adjunct Professor at the University of Miami What financial factors should retirees take into consideration when deciding where to retire? Usually, the most important financial issue is where the retiree plans to live. I have a number of clients who have asked me to analyze the financial differences between their home state and some other location. Honestly, when the costs are all added up, the difference is often negligible. My home state is known for high real estate tax costs, but that comes with a lot of services we don’t pay for, like trash removal or recycling pickup, for which other locales may charge. Retirees need to compare “apples to apples.” Along the same thought, retirees often think that moving to a new place -- a warmer climate, nearer the children -- will make for a happier retirement, but re-locating is costly, especially if you choose wrong. From a financial standpoint, I encourage clients who are thinking about re-locating to rent a home and spend vacation time in their target retirement destination, throughout the year. It’s important to test the target area seasonally, the beach in January is very different than in July. It might even make sense to rent for a year or two once they retire, to be sure their new location is the right choice. This will save money in the long run, especially if it’s the wrong choice, but even if it’s the right choice, the retirees have gained a better sense of the neighborhoods and area they choose to make their home in, and can better assess what is the correct amount to spend when they are ready to buy. What are some tips for living on a fixed income in retirement? The best tip or suggestion I share with clients is to practice being retired before they actually do it. What I mean by that is that they should try to live on the budgeted amount, and spend their vacation time as if it was a mini-retirement session. This gives the aspiring retiree a chance to determine if they are ready to be retired and if they can afford to be retired. For retirees who want to re-locate, I usually suggest planning an extended vacation in their target retirement destination. Obviously, it’s not always easy to accomplish, for instance if you plan to have the mortgage paid off prior to retiring, that dramatically affects your budget, but you can carve that amount out separately and see if the rest of your budget works. I think a “dress rehearsal” for retirement can save a lot of heartache down the road. What is the biggest mistake that people make when planning their retirements? They expect to continue working part-time at something and include that in their financial plan. Statistically, this does not bear out, and it can be a disaster. No one wants to be a 70-year-old looking for work, much better to continue in your existing job for eight more years than to retire at 62 and realize you could not afford to do it. It’s an unpleasant truth, but most people can’t afford to retire at 62, if only because of the health care costs. What percentage of income should you aim to replace in retirement? Traditionally, experts say 80% of your wages is the right amount to expect you will need in retirement, but I am not sure that works anymore. Yes, retirees won’t have the cost of payroll taxes, commuting or saving for retirement, but a surprising number of retirees have not been saving at a 10-15% rate, so that reduction may not be there. As a universal guide, the 80% suggestion may be fine, but each person’s saving and spending habits are very different. In my work, I analyze what their current budget looks like and if they are currently saving that difference, I also try to build a projected retirement budget, including their extras, and then back into what percentage of their salary we will need to replace. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough? I always ask about family life expectancies, but I generally plan for at least 90 in men and 95 in females, I will push it farther out if their families’ have been long lived. Medical advances are adding to our life expectancies, so I think it’s very reasonable to assume 60-year-olds will live into their 90’s or beyond. Should attracting more retirees be a priority for local government and if yes what should they do? Retirees can offer a lot to local communities without adding a lot of costs. Retirees don’t add to the cost of schools or athletic programs which can be expensive, but adding social events for them helps to build their interest in the community. Obviously, retirees bring a wealth of life and working experience in diverse areas, and enlisting them as volunteers within the schools, local libraries, social programs and local government brings greater perspective to the community and relieves the burden on younger working residents. It adds dimension to the community, in general. Donald A. Hoy Associate Professor and Program Chair for Management at Benedictine College What financial factors should retirees take into consideration when deciding where to retire? First, of course, is the overall cost of living of the community. Within that arena, there are several specifics I would suggest. Does the community have a personal income tax? What is the personal rate? What is the cost to travel? Are there transportation resources available -- both local and long distance -- that are affordable? Are there adequate medical and hospital care resources available locally? Often a low cost-of-living community is located a considerable distance from hospitals and specialists, making the travel to and from these resources a significant cost. Utilities, both for hot weather and cold weather, need to be considered. In addition to homeownership, what homeowners’ association fees are required for your residence of choice? Are there sufficient number of recreational sites -- museums, libraries, zoos, restaurants, theaters, etc. -- available and easily accessed? What are some tips for living on a fixed income in retirement? Preparing a financial budget on a monthly basis is critical. Be sure you understand the coverage of your health insurance -- what is and is not covered. Which doctors and hospitals are within the insurance network. Don’t be surprised by unexpected medical costs. Many of your living expenses will not be monthly, so an annual forecast of expenses is wise also. If budgeting is tight, consider having utilities on a set monthly expense, with an adjustment yearly. Consider how important the printed newspaper is to you. What other necessities can be provided in a less expensive manner? Do you need two vehicles? Can you afford to raise deductibles on your auto and homeowners insurance, thus lowering the premiums? What vacations are important and how will they be financed? What is the biggest mistake that people make when planning their retirements? The biggest mistake is to fail to plan their financial needs. Utilize a good financial advisor, who is concerned about you and not about selling a product. Plan for 10-15 years past retirement, and consider what your health and living needs will be at that time. What percentage of income should you aim to replace in retirement? Retirees should not base their planning on any fixed percentage. Each person is individual, so the importance of a personal budget is more important. Do you plan to travel? Will you need assisted living? These questions are more important than a set percentage. In planning for retirement, what life expectancy should the average person use to make sure they have saved enough? Again, there is no average person. Review your genetics and family history of life expectancy. Also consider your current health picture. What are you willing to do in retirement that will add to your life expectancy? Joining a health facility, walking or swimming, better focus on diet can have a significant impact on life expectancy. Should attracting more retirees be a priority for local government and if yes what should they do? It has long been my belief that attracting retirees to a community is good for the local economy and should be a local government priority. Focusing on the quality of life issues is most important. Make sure there is an adequate set of resources for health care, recreational activities available locally, ease of transportation -- locally and long distance, restaurants and entertainment, safety and security concerns, housing that is affordable, including maintenance provided and assisted living choices, are all areas that local governments can utilize to improve their community for retirees.

Methodology

To help Americans find the best cities to spend their golden years, WalletHub’s analysts compared the retirement-friendliness of the 150 most populated U.S. cities across four key dimensions: 1) Affordability, 2) Activities, 3) Quality of Life and 4) Health Care.

We evaluated those dimensions using 40 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for retirement. For metrics marked with an asterisk (*), the square root of the population was used to calculate the population size in order to avoid overcompensating for minor differences across cities.

Finally, we determined each city’s weighted average across all metrics to calculate its total score and used the resulting scores to rank-order the cities in our sample. Our sample considers only the city proper in each case and excludes cities in the surrounding metro area.

With cost being a significant factor in retirement, our analysis assumes retirees will rely on a fixed income. The lower their expenses, the better retirees will fare in a particular city.

Affordability – Total Points: 25

• Adjusted Cost of Living: Triple Weight (~10.71 Points)
• Taxpayer-Friendliness: Full Weight (~3.57 Points)
• Retired Taxpayer-Friendliness: Full Weight (~3.57 Points)
• Annual Cost of In-Home Services: Half Weight (~3.57 Points)
• Annual Cost of Adult Day Health Care: Full Weight (~3.57 Points)

Activities – Total Points: 25

• Recreation & Senior Centers per Capita*: Full Weight (~2.50 Points)
• Fishing Facilities per Capita*: Full Weight (~2.50 Points)
• Public Golf Courses per Capita*: Full Weight (~2.50 Points)
• Museums per Capita*: Full Weight (~2.50 Points)
• Theaters per Capita*: Full Weight (~2.50 Points)
• Art Galleries per Capita*: Full Weight (~2.50 Points)
• Music Venues per Capita*: Full Weight (~2.50 Points)
• Bingo Halls per Capita*: Full Weight (~2.50 Points)
• Availability of Adult Volunteer Activities: Full Weight (~2.50 Points)
• Recreation-Friendliness: Full Weight (~2.50 Points)

• Share of Population Aged 65 & Older: Full Weight (~1.79 Points)
• Elderly-Friendly Labor Market: Full Weight (~1.79 Points)
• Age-Friendly Community: Full Weight (~1.79 Points)
• Share of Population Aged 65 & Older Living Below Poverty Level: Full Weight (~1.79 Points)
• Share of Population Aged 65 & Older Living Alone: Full Weight (~1.79 Points)
• Walk Score: Full Weight (~1.79 Points)
• Share of Population Aged 65 to 79 with Poor Transit Access: Full Weight (~1.79 Points)
• Mild Weather: Double Weight (~3.57 Points)
• Caring Community: Full Weight (~1.79 Points)
• Strength of Elder-Abuse Protections: Full Weight (~1.79 Points)
• Violent-Crime Rate: Full Weight (~1.79 Points)
• Property Crime Rate: Full Weight (~1.79 Points)
• Air Quality: Half Weight (~0.89 Points)
• Water Quality: Half Weight (~0.89 Points)

• Family & General Physicians per 10
• Dentists per 10
• Nurses per 1
• Health Care Facilities per Capita*: Full Weight (~2.38 Points)
• Quality of Public Hospital System: Full Weight (~2.38 Points)
• Top-Rated Geriatrics Hospitals: Full Weight (~2.38 Points)
• Emotional Health: Full Weight (~2.38 Points)
• Share of Population Aged 65 & Older with a Disability: Full Weight (~2.38 Points)
• Home-Care Facilities per Capita*: Full Weight (~2.38 Points)
• Life Expectancy: Full Weight (~2.38 Points)
• Death Rate of Population Aged 65 & Older: Full Weight (~2.38 Points)

 

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Federal Bureau of Investigation, Council for Community and Economic Research, Bureau of Labor Statistics, Environmental Protection Agency, County Health Rankings, Social Science Research Council, Centers for Disease Control and Prevention, Retirement Living Information Center, Trust For Public Land, Centers for Medicare & Medicaid Services, Charity Navigator, Transportation For America, U.S. News & World Report, Yelp, Walk Score, AARP, Sharecare, Institute for Health Metrics and Evaluation, Genworth Financial and WalletHub research.

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