When people retire, according to a recent LendingTree report, Social Security covers about 30.11% of their spending on average. However, analysts at the financial website say that it won’t be enough to cover more than a third of living expenses in most of the 100 largest metropolitan areas in America.
The annual estimated pretax needed for retirees in these areas is $71,407, LendingTree writes, and the average Social Security income is $21,500.
With an implied pretax need of $61,821 and an average Social Security income of $21,398, McAllen, Texas, would cover the largest share of retirees’ spending out of the 100 metros, at 34.61%. After that is Buffalo, New York at 33.12% and El Paso, Texas, with 32.85%.
Out of all the states, California metropolitan areas covered the “smallest chunk” of retirees’ spending covered by Social Security, LendingTree found. Of the 10 metros where Social Security helped the lowest percentage of implied pretax need, eight are in California, including San Francisco (24.28%) and Los Angeles (24.85%).
In order to retire comfortably in San Francisco, one would need $1.62 million. With the average Social Security income, this means retirees need $64,638 a year.
Matt Schulz, LendingTree chief consumer finance analyst, said for many Americans, retiring comfortably might not be a possibility. au
“Most aren’t fortunate enough to have a seven-figure nest egg or a pension to lean on,” Schulz, the author of “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life,” said in a statement. “Most people have tight budgets, limited expendable income and low retirement account balances. It’s all going to add up to a challenging situation for retirees and their loved ones in the next 15 to 20 years.”
With this being said, Schulz encourages people not to ignore places like McAllen.
“There’s something to be said for living in a low-cost-of-living location, and McAllen fits that bill,” Schulz said. “Controlling your spending is a crucial step toward having a comfortable retirement, and that can be far easier in a place with cheaper housing and a lower cost of living.”
How much should you have in retirement?
Whether you want to retire in a big city or a rural spot, there are a few guidelines experts suggest people adhere to.
Fidelity Investments calculated this based on the assumption that someone, throughout their life: saves 15% of their income annually beginning at age 25, including an employer match; invests more than 50% on average of their savings in stocks; retires at age 67, and plans to maintain their “preretirement lifestyle” in retirement.
Taking that into account, Fidelity said, one should save 10 times their preretirement income by age 67.
With the other steps, saving this amount up “should help ensure that you have enough income to maintain your current lifestyle in retirement,” Fidelity said.
To get to this point, Fidelity says people should try and save at least three times their income by age 40, six times by 50 years old, and eight times their income by 60.
To see how much you’re on track to save by the time you retire, NerdWallet says to start with your current age and savings, add your annual pre-tax income, monthly contributions and your estimated monthly budget.
