Why a $1 million retirement nest egg may not be enough in Denver

Saving $1 million for retirement is a goal many people strive for. But even if they hit that mark, a study from SmartAsset suggests, it won’t be enough to cover living costs in Denver for the really long haul.

“For any prospective retiree it can be a great start, a goal, or an aspirational figure you expect to take you comfortably through your retirement years. However, that million-dollar retirement fund will get you a lot further in some cities than it will in others,” said Steve Sabato, a spokesman with SmartAsset, a personal finance website.

A million dollars will last just shy of 21 years for someone retiring in Denver at the typical age, according to SmartAsset’s calculations, which looked at housing, food, utilities, transportation, health care and other expenses.

Denver ranked 221 out of the 268 cities examined in the study, which also looked at Colorado Springs, Pueblo, Grand Junction and Glenwood Springs. Of that Colorado group, $1 million in savings would stretch the furthest in Pueblo, 25.6 years, followed by Grand Junction, 25.3 years.

Although other costs can vary somewhat, the big difference comes down to housing. The study assumed a retiree would spend $12,135 a year for housing in Denver, but only $7,353 a year in Pueblo and $8,890 in Grand Junction.

“If you have $1 million, you should be able to distribute $40,000 per year adjusted for inflation,” said Charlie Farrell, CEO of Northstar Investment Advisors in Denver.

SmartAsset assumes the typical retiree will need $58,814 a year to live in Denver. For someone retiring at 65, the average lifespan is 20 years. But about 5 percent of those retirees will need enough funds to last 30 years, according to Forbes.

Social Security payments could cover some of that gap. Another strategy is to shed that auto loan and home mortgage. Someone who has the mortgage paid off could spend less than $12,000 a year on housing in Denver. If not, they could end up paying much more.

Apartment rents in metro Denver averaged $1,465 a month in the third quarter, according to the Apartment Association of Metro Denver. And someone renting a three-bedroom home paid $2,124 on average, according to Real Property Management.

Denver’s rising housing costs complicate the retirement equation in several ways. Because homes are more expensive, people have to set aside more for housing during their working years, leaving them less to stash away for retirement.

Come retirement time, that could force some to sell the home, cash in the equity and move to a lower-cost market. A rise in the number of people moving out of the state suggests that might be happening.

“It does show that Denver is a pretty expensive place to retire,” Farrell said of the study.

The most affordable city in the survey, McAllen, Texas, would allow a retiree to survive for 33 years on $1 million. Other retirement bargains include Harlingen, Texas; Richmond, Indiana; Conway, Arkansas; and Tupelo, Mississippi.

On second thought, Pueblo and Grand Junction don’t sound so bad.

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