One hundred dollars looks a lot different depending on where you are in the United States: In Mississippi, for example, it’s worth $117, while in New York, it’s worth about $86. This is especially important to retirees on fixed incomes since there aren’t usually adjustments for geography.
That’s according to the Tax Foundation, which used data from the U.S. Bureau of Economic Analysis (BEA) to show just how far your money will go in all 50 states.
The BEA looked at regional price parities (RPPs), which express a region’s price level relative to the U.S. as a whole. The BEA analyzed prices of “all consumption goods and services, including housing rents” and found that “areas with high/low RPPs typically correspond to areas with high/low price levels for rents.”
States with the highest RPPs are Hawaii, New York and California. Sure enough, rental prices in those states are among the highest in the nation. Those with the lowest RPPs are Mississippi, Arkansas, and Alabama.
The regional price differences are significant, the Tax Foundation reports. Real purchasing power is about 35% greater in Mississippi than in New York. “In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would need after-tax earnings of $67,500 in New York just to afford the same overall standard of living,” the report says.
There are some states are an exception to the rules. The Tax Foundation says: “Some states, like North Dakota, have high incomes without high prices.”
That matters because “adjusting incomes for price level can substantially change our perceptions of which states are truly poor or rich.” Take North Dakota and Vermont, where residents earn about the same amount: $52,000 per year. After adjusting for price parity, though, real income in North Dakota is nearly $7,000 more.
This also is worth noting for fixed income retirees who want to improve the quality of their lives without having to relocate overseas. If travel is a big part of what you want to do, it may pay to move to a state with a low RPP and travel more. See our chart below before you decide.
Marc has 36 years in financial services and 6 years in teaching.
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