Never Retire - How Does Local Cost-Of-Living Affect Retirement?
Excellent paper from the Center for Retirement Research at Boston College.
Even more excellent because it’s a quick read and free to access.
Here’s the link.
I mainly want to get the research in front of you so you can read it and come to your own conclusions—and maybe even leave them in the comments. Then, in a follow-up article, I’ll consider the paper’s purpose and subsequent conclusions.
In a nutshell, the paper looks at cost of living across metro areas. Because wages tend to be higher in high cost of living areas—primarily due to housing prices—the authors assume the Social Security replacement rate will be lower in high cost of living areas, forcing households in these areas to change their behavior in one or more of three ways.
From the paper—
This brief, based on a recent paper, uses the Health and Retirement Study to document the relationship between local cost-of-living – captured by housing prices – and Social Security replacement rates.1 It then explores whether households in high-cost areas compensate for lower replacement rates by responding in three possible ways: saving more during their working years; retiring later; and/or moving to a lower-cost area when they retire.
Replacement rate being the percentage of employment income Social Security will replace at retirement.
Your thoughts are welcome and encouraged. I’ll give you mine in a subsequent installment. Probably later this week.
Well crap.