You can retire comfortably on $3,000 a month in retirement income by choosing to retire in a place with a cost of living that matches your financial resources. Housing cost is the key factor since it’s both the largest component of retiree budgets and the household cost that varies most according to geography. Therefore, choosing from among the U.S. cities with the lowest housing cost is a sensible first step to finding a place to retire at $3,000 a month. Get help from a financial advisor in choosing the right retirement location that matches your budget.
Geographic Cost of Living Factors
Being able to retire on $3,000 a month is largely dependent on picking a place with modest housing prices. More than a third of the typical retirement-age person’s household budget goes to housing, according to the Social Security Administration’s “Expenditures of the Aged Chartbook, 2020.”
The 36.8% share of retiree budgets consumed by housing, in fact, was more than the combined share of the next two largest categories. Those included out-of-pocket healthcare expenses at 14% and, at 17.5%, a broad grab-bag “other” category including expenses ranging from alcohol and tobacco to reading and education.
The 2022 report on personal consumption expenditures by the Federal Bureau of Economic Analysis (BEA) compared real price parity (RPP) for all consumption goods and services including housing rents for states and metropolitan areas. “Areas with high/low RPPs typically correspond to areas with high/low price levels for rents,” the report noted.
Housing prices are also by far the most variable among major expenses. The least expensive housing city as ranked by the BEA, among nearly 400 cities, was Johnstown, Pennsylvania, with a housing index of 43.8. The most expensive was San Jose-Sunnyvale-Santa Clara in California, with a housing index more than five times higher at 241.1.
With this in mind, when you’re looking for a city where you can retire for $3,000 a month, starting with the cities with the lowest housing costs is a promising strategy. Here are the 20 U.S. cities with the lowest housing costs, ranked least expensive to most expensive, according to the BEA analysis:
Johnstown, PA
Monroe, LA
Springfield, OH
Decatur, AL
Florence-Muscle Shoals, AL
Anniston-Oxford, AL
Sumter, SC
Gadsden, AL
Carbondale-Marion, IL
Enid, OK
Rocky Mount, NC
Wheeling, WV-OH
Pine Bluff, AR
Weirton-Steubenville, WV-OH
Parkersburg-Vienna, WV
Dothan, AL
Lawton, OK
Fort Smith, AR-OK
Houma-Thibodaux, LA
Owensboro, KY
Ranking Cities by All Costs
While for a typical retiree, housing will be the biggest cost consideration, it’s only part of the entire budget for a household. For a broader look at a low cost of living, here are the cities with the lowest price index on all items measured by the BEA, including goods, utilities and other services. They are ranked from least expensive to most expensive.
The low-cost locations tend to be in the South or Midwest and all are smaller metropolitan statistical areas. Major metropolises and cities in Hawaii, California and in the Northeast and Pacific Northwest tend to be the most expensive.
Non-metropolitan rural areas are not broken down into individual areas but, overall, they are less costly than the average city. These non-metropolitan areas have housing indexes averaging 59.9 and overall cost indexes averaging 89.
An Example $3,000 Retirement Budget
Here’s how your expenses might be allocated to a retirement budget of approximately $3,000 a month. The percentages are based on Social Security’s analysis of typical retirement-age household expenses.
Category
Percentage
Dollar Amount
Housing
36.8%
$1,104
Other
17.5%
$525
Out-of-pocket healthcare
14.0%
$420
Transportation
13.1%
$393
Food
12.0%
$360
Entertainment
4.8%
$144
Apparel
1.7%
$51
Total
100.00%
$2,997.00
Bottom Line
Picking a place to live on $3,000 a month in retirement income is largely a matter of picking a place with low housing costs. Housing is the largest and the most variable expense in the typical retiree’s household budget. Many smaller cities, often in the South and Midwest, have housing costs little more than half as high as the average and often a small fraction of the level in the most expensive cities.
You shouldn’t have to plan for retirement alone. You can use the help of a financial advisor to help you properly prepare no matter what your budget looks like. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s Cost of Living Calculator to compare living expenses in two cities you are considering for retirement.
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.
According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.
The cheapest places to retire abroad include Panama, the Philippines, Portugal, Malaysia, Mexico, Thailand and Vietnam. Before making the move, consider expenses such as travel costs, taxes and visas, which can vary significantly from one country to another.
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
Housing expenses—which include mortgage, rent, property tax, insurance, maintenance and repair costs—remained the largest expense for retirees. More specifically, the average retiree household pays an average of $17,454 per year ($1,455 per month) on housing costs, representing over 35% of annual expenditures.
Florida has regained its status as the best state for retirees in 2024. That's according to WalletHub's latest “Best and Worst States to Retire” study. In 2023, Virginia took the top spot and knocked Florida down to No. 2.
This takes discipline but ultimately will allow you to have more freedom and happiness in your golden years without money worries. “Retiring on $2,000 per month is very possible,” said Gary Knode, president at Safe Harbor Financial.
Jania says that living on $1,500 per month during retirement is definitely a possibility if you consider residing in certain states that tend to have a lower cost of living like Kansas, Mississippi or Alabama.
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
What does the 4% rule do? It's intended to make sure you have a safe retirement withdrawal rate and don't outlive your savings in your final years. By pulling out only 4% of your total funds and allowing the rest of your investments to continue to grow, you can budget a safe withdrawal rate for 30 years or more.
According to their table, for instance, the average remaining lifespan for a 65-year-old woman is 19.66 years, reaching 84.66 years old in total. The remaining lifespan for a 65-year-old man is 16.94 years, reaching 81.94 years in total.
In a world in which the average monthly Social Security benefit is just over $1,792, it may seem like a pipe dream to live off $10,000 per month in retirement. But the truth is that with some preparation, dedication and resolve, many Americans can reach this impressive level of retirement income.
For retired couples who are both receiving benefits, the average monthly income from Social Security is now $2,753. Common advice for couples is to have about 7.5x their yearly income saved for retirement.
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