Social Security was designed to replace about 40% of a worker’s income in retirement – and according to new research, that target is still attainable, depending heavily on where retirees live. A recent FinanceBuzz study analyzed how far Social Security checks stretch across the U.S. by comparing average annual benefits with state-specific senior living costs.
Nationally, Social Security covers around 38% of average retirement expenses – close to the original intent of the program. However, retirees in some states are finding that their benefits go much further than in others, often due to more affordable housing, healthcare, and everyday costs.
Top States
According to the study, Kansas ranks number one, with Social Security covering nearly 45% of average senior living expenses. The state benefits from relatively low housing and healthcare costs, making it the most cost-effective state for retirees relying on Social Security.
Following Kansas, other high-ranking states include:
| Rank | State | % of Retirement Costs Covered by Social Security |
|---|---|---|
| 1 | Kansas | 44.8% |
| 2 | Oklahoma | 44.4% |
| 3 | Indiana | 43.6% |
| 4 | Minnesota | 43.4% |
| 5 | Iowa | 42.8% |
| 6 | Arkansas | 42.6% |
| 7 | Missouri | 42.3% |
| 8 | Michigan | 41.8% |
| 9 | Texas | 41.7% |
| 10 | Ohio | 41.5% |
Overall, 24 states had Social Security benefits meeting or exceeding the 40% income replacement threshold. Most of these states are located in the Midwest or parts of the South, where cost-of-living levels remain relatively modest.
Strategy
For many Americans, retirement planning includes the possibility of relocating. Data from the Transamerica Center for Retirement Studies shows that nearly two in five retirees move once they leave the workforce – often in search of lower expenses and a better quality of life on a fixed income.
A growing trend is to earn and save in higher-income states and then retire in more affordable ones. This “geographic arbitrage” strategy is increasingly used to stretch retirement income. As Josh Koebert, a researcher at FinanceBuzz, explained:
“Live and work in a place where you get paid a lot and can contribute a lot, and then move to a place where there’s a lower cost of retirement.”
High Costs
On the other end of the spectrum, retirees in Hawaii, Massachusetts, and California face a much tougher financial reality. These high-cost states significantly erode the value of Social Security income due to expensive housing, food, and transportation.
| Rank | State | % of Retirement Costs Covered by Social Security |
|---|---|---|
| 48 | California | 27.6% |
| 49 | Massachusetts | 25.8% |
| 50 | Hawaii | 21.2% |
In Hawaii, Social Security covers just a little over 21% of average retirement expenses – the lowest in the nation. Massachusetts, California, and the District of Columbia also fall below the 30% coverage mark, meaning retirees there must rely far more on other income sources like savings, pensions, or part-time work.
Preferences
Interestingly, affordability isn’t always the deciding factor for where retirees choose to live. In fact, Massachusetts topped AARP’s 2024 list of retirement destinations, despite its high living costs. Other high-ranking states included Florida, Illinois, and Kentucky.
This suggests that family proximity, healthcare access, lifestyle, and personal preference often outweigh purely financial considerations when retirees make relocation decisions.
Balance
Experts emphasize that cost is just one part of the retirement equation. Yale finance professor Matthew Spiegel offered an important reminder:
“Housing in rural Florida costs less than in Manhattan. But if our hypothetical retiree wants to attend Broadway shows and Knicks games regularly, the frequent flights from rural Florida to Manhattan will quickly become costly in terms of time and money.”
In other words, the “cheapest” place to live may not be the most realistic or satisfying for everyone’s lifestyle.
Retirement planning is complex, and while stretching Social Security as far as possible is a major factor, it must be weighed alongside personal needs and goals. For those open to relocating, the right state can make a major difference in how far their benefits go.
FAQs
Which state ranks best for Social Security value?
Kansas ranks first, with benefits covering 44.8% of costs.
Where do benefits stretch the least?
Hawaii ranks last, with Social Security covering just 21.2%.
Does Social Security cover 40% of costs nationally?
Nationally, it covers about 38%, close to the intended target.
Is relocating after retirement common?
Yes, about 40% of retirees move to reduce living costs.
