Having $1 million in your 401k or IRA is a major achievement, one not everyone reaches and that plenty more spend a lifetime working towards. There are, however, more ways to achieve a $1 million net worth than simply saving.
Depending on where you live, you could be hampered — or bolstered — in your quest to build your nest egg up to six figures, based on the results of a new study by GOBankingRates. Balancing factors ranging from cost of living and income tax rates to the average interest return on a savings account, the study helps you understand if the state you call home is hurting or helping you reach your retirement goals.
There’s no state in America where you’ll have a harder time reaching that second comma in your retirement account than the Green Mountain State. Living there, you’ll get hit with high property taxes and one of the lowest average interest rates on a savings account. That’s why it shouldn’t be too surprising that Vermont is one of the states with the poorest retirees.
Oregon has the second-highest income tax rate for median incomes, the second-lowest average return on a savings account and one of the highest costs of living, all of which make growing your nest egg that much harder.
Hawaii might be an island paradise, but it’s a pretty expensive place to live, with the highest cost of living and the third-highest state income tax rate for median incomes. So not only will you have one of the hardest times saving up $1 million for retirement, but that $1 million will only last you about 12 years — the shortest length that $1 million will last you in retirement in the country.
Montana not only has one of the highest income tax rates in the country, but its banks are offering the most meager returns on your money. Across the board, Montana has the lowest APY for CDs and savings accounts alike. That might be why a plurality of Montanans admitted to having less than $10,000 saved for retirement.
In addition to being one of the pricier states to live in, Connecticut has the sixth-highest property tax rate for median earners. That’s part of why Connecticut is one of the least tax-friendly states for retirees.
45. New Jersey
New Jersey is among the states with the highest costs of living. But if there’s one thing that’s really making it hard to build up your retirement savings, it’s taxes. New Jersey is among the most taxed states in the country.
One of the factors that pushed Maine to the bottom of this study is the income tax rate. Maine has the sixth-highest state income tax on people with median income levels.
Not only does Illinois have the second-highest property tax rate of any state in the country, but it’s also harder to make your savings work for you — it has one of the lowest average APYs for CD accounts.
Wisconsin residents who are working to find a way to save $1 million in their retirement account might consider opting for a more modest home as a way of getting there: The effective property tax rate in the state is the fourth-highest in the country.
Not only is California an expensive place to live — second only to Hawaii — but it also has the highest income tax rate for residents earning a median income.
Building your retirement savings might be difficult, but there could be other options to save up the money when you need to stop working: Several of the housing markets with the highest returns over the last 20 years are in California.
Living in Nebraska sure hasn’t stopped Warren Buffett from building his wealth. But the state’s high property taxes are making it a lot tougher for the rest of the population.
39. Rhode Island
Rhode Island might be the smallest state, but there’s nothing small about the cost of living there: It’s actually among the 10 highest in the country. Add to that an effective property tax rate that’s also among the 10 highest, and it should be clear why Rhode Island ranks so low.
38. New York
New York’s cost of living is among the highest in the country, making it harder to save for the future by running up your bills in the present. That state also has higher-than average property and income tax rates, which aren’t helping either.
While the cost of living in Iowa is relatively low, the state has the fourth-highest state income tax rate eating up a chunk of that cash that might otherwise be earmarked for your retirement accounts.
The Land of 10,000 Lakes is also home to one of the higher income tax rates in the country, driving it down in the rankings for this study. The state also has relatively high property tax rates and a cost of living that’s right in line with the rest of the country.
35. South Carolina
South Carolina is among the five states with the lowest effective property tax rates in the country, but it counterbalances that with a state income tax rate that lands it among the 10 states with the highest rates.
34. New Hampshire
New Hampshire has the third-highest effective property tax rate in the country, making it somewhat typical of New England in that sense. The region can claim four of the 10 states with the highest property taxes.
The state of Idaho boasts a relatively low cost of living, but it’s also home to the fifth-highest income tax rate on median incomes in the country. However, despite the taxes, Boise ranked well as one of the great places to retire where rent is under $1,000 a month in a previous GOBankingRates study.
You would think that the Great Lake State would be higher on this list given that it’s so cheap to live there — with the fourth-lowest cost of living in the study — but the state also has the eighth-highest effective property tax.
31. West Virginia
West Virginia lands in the bottom half of this study due to weak returns on money in CDs or savings accounts, but it certainly isn’t there because of high costs for home ownership. Not only does West Virginia have the lowest median home price in the country at just $102,900, but its effective property tax rate is the sixth-lowest in America.
Maryland is one of America’s more expensive states — the seventh-highest cost of living in the country — which has many of its residents not only struggling to save for retirement but just to keep themselves above water. Only Hawaiians have more debt per person than Marylanders.
The primary culprit keeping Massachusetts in the bottom half of the states in this study is its cost of living, which is almost a third higher than the nation as a whole. Lucky for them many residents can afford it — the state has the fourth-highest average household income in the U.S.
Kansas is a fairly inexpensive state to call home, ranking among the cheaper states in America. However, its relatively high state income and property tax rates kept it from ranking higher.
Kentucky residents might have relatively a low cost of living and effective property tax rate, but it’s harder to make the money you save there grow as the state has one of the lowest average APYs for savings accounts.
That said, if you do get to $1 million in your retirement account you might not have to look far for the ideal place to retire: Louisville suburb Hayfield Dundee is among the best neighborhoods to retire to in the U.S.
26. North Dakota
North Dakota might not be one of the seven states with no income tax like its neighbor to the south, but it does have the lowest state income tax rate of those states that do have one at just 2.04 percent of median income.
25. New Mexico
While New Mexico might be right in the middle of the pack for making it easy to save up that $1 million nest egg, residents should remember that a lot of their neighbors might be having even more trouble than they are: New Mexico has the second-highest poverty rate in the country with more than one out of every five residents below the poverty line.
Missouri might have the gateway to the west, but the good news for residents is that the toll isn’t excessive: The state has the sixth-lowest cost of living in the country, helping it climb the rankings despite a relatively high state income tax rate.
Ohio is on the lower end of the scale for cost of living and state income tax rates, helping it overcome higher property tax rates and lower returns on bank accounts. And if you want to stay in the state after getting to that $1 million in retirement savings, you should consider Toledo, one of the cheapest places to retire in America.
Arkansas is a state where it costs a lot less to get by, with the second-lowest cost of living in the study. On taxes, though, the state has a mixed record. The property taxes are among the 10 lowest in the country, but the state income taxes are among the highest.
The Keystone State climbed this list due to one of the lowest state income tax rates charged to residents earning the median income there.
Georgia lands in the top 20 despite having a state income tax rate of 6 percent for people earning median-level incomes. However, it’s also among the 10 states with the lowest cost of living in the U.S.
19. North Carolina
North Carolina managed to move up the rankings of the best places to save $1 million for retirement because it didn’t score drastically low in any category. It’s also home to at least a few housing markets that should help you get there: Two different cities are among those where you can buy a house for under $100,000.
18. South Dakota
Rural South Dakota is doing its part in helping residents funnel as much of their income as possible into that 401k: It’s among the seven states that charge no state income tax, helping push it up the list.
Virginia is among the 20 states where it’s easiest to save $1 million for retirement. But even if you fall a little short of your ultimate goal, you should remember that Lynchburg is the best place in the state to live on a fixed income.
Delaware has the fourth-lowest property tax rates, helping residents keep more of their hard-earned cash to deposit into their retirement savings. That said, Delawareans might want to be sure to have that emergency fund fully stocked as well: Delaware is among the states least prepared for a recession.
Arizona is one of the better states for saving up $1 million for retirement, though that’s not because of the average return on a savings account, which is among the lowest in the study.
And if you also want to call Arizona home after you move from saving for retirement to living in retirement, consider Green Valley outside of Tucson, named one of the best suburbs for retirees in a separate GOBankingRates study.
Alaska lands here due to being one of the seven states without a state income tax. However, residents might need that relief as it’s also among the most expensive places to live: Alaska has the fifth-highest costs of living in the country.
Indiana’s position ranks this high on the list because of its very low cost of living. And that not only helps you save for retirement, it helps you ensure those savings will stretch far enough as well.
Oklahoma is one of the better places to save for retirement largely because its costs of living are low — the third lowest in the country to be specific. It’s also a good place to call home after you’re retired, especially if you didn’t make it all the way to that $1 million nest egg: A comfortable retirement there only costs $42,066 a year.
Tennessee just missed out on the top 10 states for making it easier to save for retirement, but it did crack the top 10 for having the lowest cost of living and the lowest state income tax rates for people with median-level incomes.
Nevada — another place with no state income taxes — is doing plenty to help you keep your money flowing into your retirement savings account … just as long as you can stay out of the casinos.
It’s no secret why Alabama is such a great place to hit your savings goals for your retirement: The state has the eighth-lowest cost of living in the U.S.
Colorado features some of the lowest property taxes in the country, but that’s likely a welcome relief for anyone braving the real estate market there: Colorado has the fourth-highest median home prices in America.
Mississippi is the cheapest place to live in the country, giving residents more money to route into their savings. And they will get more for that money — the state’s average APY on savings accounts is the third-highest in the study.
Not only is Florida one of the places you can live to avoid any state income taxes, but there’s plenty of additional options for income streams that can help you get to that $1 million in retirement savings that much sooner. Several Florida cities are among the best places to own investment property.
With no state income tax, Texas is one of the best places to live if you want to save up $1 million for retirement. What’s more, it’s not a bad place to spend those savings, either. That $1 million in retirement savings will last about 26 years living in Houston.
Not only does Wyoming have no state income tax, but it’s also among the lowest in the U.S. for its effective property tax rate as well, helping push it up the rankings for the state where it’s easiest to save $1 million for retirement.
Louisiana clearly has a lot going for residents focused on building a big nest egg, but no factor stands out like the effective property tax rate, which is lower than every state in the country except for two — Hawaii and Alabama.
If you don’t mind the rain, Washington has a lot to offer for people looking for somewhere where they can reach their six-figure retirement goal the fastest.
Utah wins out as the best state to live in if you’re looking to save $1 million for retirement, driven by one of the lowest effective property tax rates in the country.
Becoming a Millionaire in Retirement Is Easier in Some States Than Others
One of the clear results of the study is that saving for retirement is clearly easier in a state where you aren’t going to see additional state income taxes on your annual return: Five of the seven states without state income taxes ranked in the top 10, and the lowest finisher of that group of seven is South Dakota, which is still among the top 20.
If saving $1 million for retirement is on the top of your financial to-do list, consider where you live as it can make or break that lofty fiscal goal.
Click through to see the states where you’re most likely to live paycheck to paycheck.
More on Retirement Planning
- How Long $1 Million in Retirement Will Last in Every State
- What It Takes to Save $1 Million for Retirement
- Do These 13 Things to Boost Your Retirement Savings Now
- Watch: How One Couple Retired in Their 30s to Travel in an Airstream RV
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Methodology: GOBankingRates determined where it is easiest and hardest to save $1 million for retirement by analyzing each state in terms of the following factors: (1) overall cost of living in the state, sourced from the Missouri Economic Research and Information Center, data representing 2017 annual averages; (2) effective property tax rate for the state, sourced from Tax Foundation; (3) state income tax rates, using the tax bracket that corresponds to the state’s median household income, sourced from Tax Foundation; under the banking category, (5) the highest 1-year CD APY, (6) the average 1-year CD APY, (7) the highest savings account APY, (8) the average savings account APY available in each state, sourced from GOBankingRates’ internal banking rates database. Each category was then scored and weighted to determine the final rankings.