Social Security retirement benefits, designed to replace about 40% of earned income, are falling far short of essential retirement living costs in California, according to a report from personal finance site FinanceBuzz.
The report found that a typical retiree age 65 and older in California needs $84,513 a year for essential expenses. The average Social Security benefit totals $22,861 a year, covering only 27.1%. The annual cost estimate includes housing, medical care, food, and insurance.
That is a much wider gap than the national average. Nationwide, essential annual retirement costs average $61,824, and the average annual Social Security benefit of $23,478 covers 38.0% of that amount. The report noted that the national average is close to the program’s 40% target.
FinanceBuzz said lower coverage rates tend to track with higher living costs. Because of its expensive cost of living, California ranked among the lowest in the country for how much Social Security covers.
Only Hawaii and Massachusetts were found to be more difficult than California using this measure. In Hawaii, annual retirement costs average $111,097, and the average annual benefit of $23,634 covers 21.3%. In Massachusetts, annual costs average $93,230, and the average annual benefit of $24,742 covers 26.5%.
The report also listed Washington, D.C., Alaska, New York, Maine, Montana, Oregon, and Vermont among the bottom 10 areas where Social Security covers the smallest share of essential living costs. All of them were below 40%.
At the same time, about half of states met the program’s target. In 24 states, Social Security covered at least 40% of annual living expenses.
The highest coverage rate was in Kansas. The report found Kansas retirees face average annual living costs of $54,961, while the average annual Social Security benefit is $24,603, enough to cover 44.8%. Oklahoma followed at 44.1%, Indiana at 43.5%, and Minnesota at 43.0%. The rest of the top 10 included Iowa, Nebraska, Alabama, Missouri, Michigan, and Tennessee.
FinanceBuzz said the gap in affordability can strongly influence relocation after retirement. Citing the Transamerica Center for Retirement Studies, the report said close to two out of five people relocate around retirement, and that in most cases the move is meant to reduce housing size and lower living costs.
FinanceBuzz said, “After working in an area with higher income where it is possible to pay more in contributions, moving after retirement to a place with lower living costs can be one strategy.”
Still, the report said retirees do not always move only to low-cost states. According to a report from the AARP, the top destination chosen by retirees in 2024 was Massachusetts, despite its high cost of living. Florida, Illinois, and Kentucky also ranked among the most selected destinations.
Experts said, “Rather than choosing a retirement destination based only on taxes or home prices, health care, family, climate, and living infrastructure work together.”
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
