Where Retirees Rely Most on Social Security – 2021 Edition

Where Retirees Rely Most on Social Security – 2021 Edition – SmartAsset

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Social Security is a financial safety net for millions of retired Americans. Founded in the aftermath of the Great Depression, this social insurance program was designed to pay out monthly income for workers after reaching full retirement age. But for most people today, the money provided by Social Security is not enough to live on during retirement. More than 64 million beneficiaries will see an increase of 1.3% in 2021, which translates to a modest raise of $20 a month. This means that average benefits total just $1,543 per month, compelling many Americans to supplement that income with pensions, 401(k) plans and other retirement savings programs. Keeping this in mind, SmartAsset analyzed data from top U.S. cities with the largest populations aged 65 and older to identify where retirees are the most dependent on Social Security.

To do this, we took the average total retirement income and the average Social Security income from the 100 U.S. cities with the largest 65-and-older populations and found out where Social Security makes up the biggest percentage of total retirement income. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

This is SmartAsset’s 2021 edition of our study on the cities where retirees rely most on Social Security. You can read the 2020 edition here.

Key Findings

  • Social Security is 40.12% of retirement income on average. Across the 100 cities we studied, Social Security represents 40.12% of all retirement income. This shows how important it is to save for retirement when you are young, as Social Security isn’t going to be able to make up most of what a person needs in retirement. In only one city – Fort Wayne, Indiana – does Social Security make up the majority of retirement income.
  • California retirees rely the least on Social Security. The bottom of the study is dominated by the Golden State. Of the bottom 20 cities, 12 are in California, with Social Security making up an average of just 34.65% of their overall retirement income. For a comparison, Social Security benefits in the top 20 cities of this study average 45.39% of their overall retirement income.

1. Fort Wayne, IN

With more than 37,000 people aged 65 and older, Fort Wayne, Indiana tops our list as the U.S. city in which retirees rely most on Social Security. The average combined retirement income there is $38,455. Social Security benefits – averaging $20,047 – make up more than half of the overall retirement income (52.13% to be precise).

2. Hialeah, FL

Hialeah, Florida has almost 48,000 people aged 65 and older. Their average combined retirement income is $26,328, and Social Security makes up 49.88% of it, averaging $13,132.

3. Wichita, KS

Wichita, Kansas has more than 54,000 people aged 65 and older. These retirees have an average combined retirement income of $40,867. Social Security income makes up 48.32% of it, averaging $19,748.

4. Tulsa, OK

Tulsa, Oklahoma has more than 56,000 people aged 65 and older. The average retirement income, excluding Social Security benefits, is $22,340. Tulsa retirees average $19,577 in Social Security benefits, which makes up 46.70% of their overall retirement income.

5. Indianapolis, IN

Indianapolis has more than 105,000 residents older than age 65, the largest population of retirees in the top 10 of this study. Those retirees have a combined average retirement income of $40,991. Social Security makes up 46.36% of that income, averaging $19,005.

6. Mesa, AZ

Retirees in Mesa, Arizona average a combined retirement income of $46,995. Non-Social Security income is $25,534. And Social Security benefits average $21,461, making up 45.67% of the total retirement income.

7. Port St. Lucie, FL

Port St. Lucie has almost 39,000 residents older than the age of 65. Their average combined retirement income is $47,235. Of that total, 45.23% ($21,364) comes from Social Security benefits.

8. Omaha, NE

With a 65-and-older population of more than 61,000, Omaha, Nebraska’s combined retirement income averages $44,775. Social Security makes up 45.13% of that total income, averaging $20,206.

9. Nashville, TN

With almost 78,000 people older than the age of 65, the average Social Security income in Nashville, Tennessee is $19,692. This makes up 44.77% of their overall retirement income, which averages $43,980. That means that they have $24,288 in non-Social Security income.

10. Toledo, OH

With a little more than 39,000 people aged 65 and older, Toledo, Ohio rounds out the top 10 of our study with an average Social Security income of $17,008. That makes up 44.62% of their overall retirement income, which averages $38,118.

Data and Methodology

To find the places where retirees rely most on Social Security, we examined data for the 100 cities with the largest population of residents aged 65 and older. Specifically, we looked at the following two metrics:

  • Average retirement income for senior households. This is all income which comes from pension plans, periodic income from annuities or insurance and income from IRA plans. Data comes from the U.S. Census Bureau’s 2019 5-year American Community Survey.
  • Average Social Security income for senior households. This includes Social Security pensions and survivors benefits and permanent disability insurance payments made by the Social Security Administration. Data comes from the U.S. Census Bureau’s 2019 5-year American Community Survey.

We combined the two income metrics to create one overall retirement income metric. We divided average Social Security income by overall retirement income, showing what percentage of total retirement income was coming from Social Security. We then ranked the cities from highest to lowest.

Tips for Retirement

  • Rely on an expert. Saving early and often is important for a comfortable retirement. The right financial advisor can help you create a financial plan for your retirement needs. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Run the numbers now to stay on track. Use SmartAsset’s free retirement calculator to see what you will need in retirement income and if you are on pace to have saved enough.
  • Make workplace benefits work for you. If you have access to a workplace retirement plan like a 401(k), make sure to take advantage of it. This is often the easiest way to save money for retirement.

Photo credit: ©iStock.com/PETTET

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.

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How My 401k Loan Cost Me $1 Million Dollars

401k loan

401k loan

Today, I have a great guest post from a reader, Ashley Patrick. She asked if she could share her story with my audience, and I, of course, had to say yes! This is her personal story about how her 401k loan cost her a ton of money and why you shouldn’t take be borrowing from your 401k.

You’ve been thinking about getting a 401k loan.

Everyone says it’s a great loan because you are paying yourself back!

It sounds like a great low risk loan at a great interest rate for an unsecured loan.

But you know the saying “if it sounds too good to be true, it probably is”.

So you’re thinking, what’s the catch?

I take out a loan without having to do a withdrawal and I pay myself back. I’m paying myself back at a low interest rate right, so what’s wrong with that?

Well, I’m about to tell you how our 401k loan cost us $1,000,000 dollars.

You see, there are a lot of reasons to not take out a 401k loan and they all happened to ME!

Related content:

How My 401k Loan Cost Me $1,000,000

Let me start at the beginning….

My husband and I bought our dream house when we were just 28 & 29 years old. This was our second house and honestly, more house than we really should have bought. But you know, it had a huge 40×60 shop and we loved the house and property. So there we were buying a $450,000 house with a 18 month old.

This house was gorgeous on 10 acres of woods with floor to ceiling windows throughout the entire house.

So there we were with a $2200 a month house payment, an 18 month old in daycare, and both of us working full-time. Within 2 months of us buying this house we found out I was pregnant again! We had been trying for sometime so it wasn’t a surprise but there was a major issue with our new dream home.

The layout didn’t work for a family of 3. It was a small 2 bedroom with an in-law suite that didn’t connect to the main house.

There was a solution though. We could enclose a portion of the covered patio to include another bedroom and play area and connect the two living spaces.

The problem was this was going to cost $25,000. We certainly didn’t have that much in savings and the mortgage was already as high as it could go.

So what were we to do? We have numerous people that were “financially savvy” tell my husband that we should do a 401k loan. We would be paying ourselves back so, we weren’t “really borrowing” any money. It was our money and are just using it now and will pay it back later.

Our first issue with the loan

This seemed like a perfect solution to our problem. So we took out a $25,000 401k loan in the summer of 2013. I checked the 401k account shortly after the loan and realized they took the money out of the 401k. I was very upset about this and thought there must have been some mistake.

Come to find out, they actually take the money out of your 401k. So, it’s not earning any compound interest. I thought that the 401k was just the collateral. I didn’t realize they actually take the money out of it.

So, nothing else seemed like a good option so we just kept the loan. Construction was finished just in time for the arrival of our 2nd child. The layout is much better and much more functional for our family.

Everything seemed fine and the payments came out automatically from my husband’s paycheck.

Then issue #2 with 401k loans

Then came the second issue with the 401k loan…..

In January 2014, my husband was laid off from his job. So there we were with a newborn and a 2 yr old in an expensive house and my husband, the breadwinner, lost his job of 7 years. You know the one he never thought he would lose, so why not buy the expensive house? Ya, that one, gone.  

I cried about it but figured out how long our savings and severance package would last and knew we would be okay for several months.

Well, then we get a letter stating we have 60 days to payback the 401k loan, which at this point was over $20,000. We had made payments for less than a year out of the 5 year loan.

My husband didn’t have job yet and we didn’t have that much in savings. I certainly wasn’t going to use what was in savings to pay that loan either. I may have needed that to feed my children in a few months.

So, we ignored it because we couldn’t get another loan to pay it at this point.

Luckily, I married up and everyone loves my husband. So, he was able to find another job rather quickly.

We were thankful he had another job and didn’t think about the 401k loan again.

Then came issue #3

That was until a year later in January of 2015. Here came issue number three with 401k loans.

We got a nice tax form in the mail from his 401k provider. Since we didn’t/couldn’t pay back the loan in the 60 days, the balance counted as income. You know, since it actually came out of the 401k.

Then I did our taxes and found out we owed several thousand dollars to the IRS. We went from getting a couple thousand back to owing around $6500. So it cost us around $10,000 just in taxes. It even bumped us up a tax bracket and cost us more for taxes on our actual income as well.

I ended up putting what we owed on a 0% for 18 months credit card and chalked it up to a big lesson learned. I will never take out a 401k loan again.

The silver lining

In reality, my husband losing his job has been a major blessing in our lives. He is much happier at his new job. This also started my journey to financial coaching.

You see, when I put the taxes on the credit card, I didn’t have a plan to pay that off either. When I started getting the bills for it, I realized I had no idea how we would pay it off before interest accrued.

That led me to find Dave Ramsey. Not only did we have it paid off in a couple months, but we paid off all of our $45,000 debt (except the mortgage) in 17 months!

The true cost of 401k loans

Just recently I did the math and realized what our 401k loan really cost us.

It cost us $25,000 from our 401k and roughly about $10,000 in taxes. So that’s already $35,000 from the initial loan.

We were really young for that $25,000 to earn compound interest. If we had left it where it should have been, we would have had a lot more money come retirement age.

The general rule of thumb for compound interest is that the amount invested will double every 7 years given a 10% rate of return. And yes, you can earn an average of 10% rate of return after fees.

We were 28 and 29 years old when we took that loan out. If we say we would retire or start withdrawing between 65-70 years old, then that $25,000 cost us around $1 million dollars at retirement age.

Now yes, I could try to make up for the difference and try to put more in retirement but I’ve already lost a lot of time and compound interest. Even if we had $25,000 to put in retirement today to make up for it, I’ve already missed a doubling. 

But that won’t happen to me, so why shouldn’t I take out a 401k loan?

Life changes and now I am not working full-time and have an extra kid. So, thinking that you will pay it back later doesn’t always happen as fast as you think it will.  

Something always comes up and is more important at that time. So learn from my mistakes and don’t take out a 401k loan.

Actually, start saving as much as you can as young as you can. 

You may even be thinking that you aren’t quitting your job and will pay it all back, so no big deal, right? Actually you are still losing a ton of compound interest even if you pay the entire thing back.

The typical loan duration is 5 years. That’s almost a doubling of interest by the time it’s paid back in full. So, it may not be as dramatic as my example but you are still taking a major loss at retirement age.

The thing is, you have to figure in the compound interest. You can’t only look at the interest rate you are paying. You are losing interest you could be gaining at a much much higher rate than what you are paying on the loan.

Lessons Learned from my 401k loan

Some lessons I learned from taking out this 401k are:

  • Don’t miss out on compound interest
  • It’s not a loan, it’s a withdrawal
  • If you want to change jobs or lose your job, it has to be paid back in 60-90 days depending on your employer
  • If you can’t or don’t pay it back, it counts as income on your taxes

So if you are considering a 401k loan, find another way to pay for what you need. Cash is always best. If you can’t pay cash right now, wait and save as much as you can. This will at least limit the amount of debt you take on.

Determine if what you want is a need or a want. If it’s a want, then wait. A 401k loan should be used as an absolute need and last resort.

It keeps you tied to a job for the duration of the loan which is usually 5 years. This could limit your opportunities and put you in an even bigger hardship if you lose your job.

I hope you will learn from my mistakes and make an informed decision about these types of loans. Don’t be like me and make an ill-informed decision.

Ashley Patrick is a Ramsey Solutions Financial Master Coach and owner of Budgets Made Easy. She helps people budget and save money so they can pay off their debt.

What do you think of 401k loans? Have you ever taken one out?

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How to Retire in Singapore: Costs, Visas and More

How to Retire in Singapore: Costs, Visas and More – SmartAsset

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Singapore is a tiny country made up of 64 islands clustered around the end of the Malay Peninsula. Most of its population of nearly 6 million lives in Singapore City. Many locals speak English, and it is home to many human-made wonders, including a massive artificial waterfall, iconic skyscrapers and what is generally regarded as the world’s best international airport. If you are considering the Lion City, as Singapore is sometimes called, as your retirement destination then it is wise to partner with a financial planner to help make your dream of retiring in Singapore a reality.

Cost of Living and Housing in Singapore

Singapore is less expensive than the largest U.S. cities, such as New York, but more expensive than smaller American cities like St. Louis, according to Numbeo, a cost-of-living database. For example, a standard of living in New York that would set you back $ could be roughly matched in Singapore for about $2,000 a month less, according to Numbeo.

On average, rent in the U.S. is 36% lower than in Singapore, but that changes when comparing this southeast Asian nation with the largest U.S. metropolitan areas. For example, you can expect to pay about $3,415 per month in rent for a one-bedroom apartment in central New York City and about $6,610 for a three-bedroom apartment. In central Singapore, you can expect to pay about $2,171 per month for a one-bedroom apartment and about $4,030 for a three-bedroom apartment.

Property costs more in Singapore. Buying a one-bedroom apartment in the center of Singapore will cost about $2,500 per square foot; a comparable residence in New York City will cost about $1,500 per square foot.

Retire in Singapore – Visas

Singapore does not offer a specific retirement visa, but they have several options for retirees to obtain a residence permit.

First, if you worked in Singapore before the age of 50, you might have an option to continue your visa into retirement. If you want to move to Singapore after age 50, you can use Singapore Entrepreneur Pass or the EntrePass, which requires that you start a company with paid-up capital of at least $37,000.

After two years of acquiring the EntrePass and permanent residency, you can apply for citizenship. However, you’ll need to show significant “financial merit” and relation to a Singaporean citizen for government approval.

All other routes to a permanent resident visa in Singapore require being married to a Singaporean citizen, having a work pass or making a major investment in a Singaporean entity.

Retire in Singapore – Healthcare

Singapore has some of the best healthcare in Asia. According to Knoem’s healthcare efficiency index, Singapore’s healthcare system is rated second in the world. This index takes both life expectancy and health expenditure into account. Singapore does not provide free healthcare to expats, so retirees must have private healthcare insurance. Insurance for expats can cost up to $300 per month.

Even with insurance, people may be required to pay for expenses out of pocket, including elective procedures and deductibles. Even without full coverage insurance, a trip to the doctor can cost as little as $25.

The cost of medication in Singapore can vary. Typically, general practitioners and specialists will dispense medications after you’ve seen a doctor. In general, private insurance will cover the cost of medications.

Retire in Singapore – Taxes

All citizens and residents of Singapore who work in the country must pay into the Central Provident Fund. Foreigners who do not work in Singapore do not have to pay into the Central Provident Fund, even if they are residents. There may be a tax on pension income depending on how much you receive.

U.S. Citizens are generally required to file a tax return each year. To avoid paying taxes twice, especially on pension income, it is wise to work with a financial planner and a tax professional that understands the Singapore tax system’s intricacies. Income is taxed at a maximum of 22% in Singapore, so you may want to change your tax status to Singapore if you earn over a certain amount.

Retire in Singapore – Safety

The 2020 Gallup Law and Order Index ranks Singapore as No. 1 in the world for law and order. The index also ranks Singapore as the city where people feel most safe to walk alone.

According to the U.S. Department of State, personal crime in Singapore is very low. The department also notes that Singapore topped the list as the world’s safest city in the categories of personal and infrastructure security, according to the Economist Intelligence Unit 2019 Safe Cities Index.

However, like other major cities, expats need to watch out for pickpocketing, theft of unattended property and purse snatching.

The Takeaway

Singapore is a beautiful country and attracts thousands of expats every year. It is safe for Americans and has similar standards and costs of living. Language won’t be a problem: English is one of four official languages, the others being Mandarin, Malay and Tamil. While it would be difficult for most U.S. citizens to live in Singapore on Social Security retirement benefits alone, someone with a pension or other retirement fund could possibly live comfortably in Singapore in retirement.

Tips on Affording Retirement

  • Consider talking with a financial advisor before moving abroad. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free advisor matching tool can connect you to several financial advisors in your area in just minutes. If you’re ready, get started now.
  • While many Americans would find it difficult to retire to Singapore on their Social Security benefits alone, it may be possible to do that if you also had a pension. Use a Social Security calculator to see what you can expect to receive from Uncle Sam in retirement.

Photo credit: ©iStock.com/southtownboy, ©iStock.com/fotoVoyager, ©iStock.com/mehdi33300

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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What Is an Accredited Retirement Plan Consultant (ARPC)?

What Is a Accredited Retirement Plan Consultant (ARPC)? – SmartAsset

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Salespeople and marketers working in the financial services profession, as well as college students, can earn the Accredited Retirement Plan Consultant (ARPC) certificate to show they have proficiency and professionalism sufficient to help employers create effective retirement plans for workers. That includes plan features and designs as well as how to educate, advice and communicate with eligible employees about the plan, not to mention marketing the plans. They can also address required reporting and compliance demands. Meanwhile, a financial advisor can offer individuals, whether they are employees or not, valuable advice on creating, adjusting and monitoring their own personal financial plan.

ARPC Issuing Body

The Society of Professional Asset Managers and Recordkeepers (SPARK) is the sponsor of the ARPC certificate. The nonprofit was formed in 1998 and acts as an advocacy group on federal retirement policy. The membership of SPARK includes many of the financial industry’s top companies, including BlackRock, Fidelity, Charles Schwab and Merrill Lynch. In addition to the APRC certificate program, SPARK provides research, training and other resources on cybersecurity, fraud, compliance and industry best practices.

The ARPC has been offered since 2004. About 150 financial professionals currently hold the certificate. So it’s not an especially common certification.

ARPC Certification Requirements

The ARPC designation is primarily intended for people already working in sales and marketing in the retirement plan field. With the exception of students, applicants must have a year of full-time experience.

SPARK further defines a year of experience as at least 2,000 hours of working in financial services. That has to include at least 400 hours spent selling, marketing or providing services to retirement plans and plan participants.

Applicants must provide a recommendation letter from a current work supervisor. The recommendation letter has to verify the type and amount of the application’s work experience.

Students currently enrolled in a college or university can apply without the required job experience requirement. Instead, they need a recommendation from a faculty member or department head to qualify.

Student applicants won’t receive their ARPC until they complete a year of professional work experience, however. The relevant work experience can include an internship.

The ARPC Exam

ARPC applicants also have to pass a certification exam. This is a 100-question multiple-choice test that must be completed within two hours with a passing score of 73% correct. The exam questions are designed to test the applicant’s knowledge of how to determine an organization’s retirement plan needs, evaluate the effectiveness of organization’s current retirement plan, formulate a suitable retirement plan solution, present it to the employer and assist in implementation and follow-up.

No coursework is required to sit for the exam. However, applicants can take an online ARPC course that presents material based on the exam outline.

Costs to Get an ARPC

ARPC applicants have to pay a $350 application fee and taking the exam costs another $150. The optional self-paced online ARPC training course costs $850. Applicants who pay for the SPARK ARPC course can have the $350 application fee waived.

ARPC certificate holders pay $150 annually to renew the designation. Each year they also have to complete 10 hours of continuing education courses. SPARK offers five-hour continuing education courses that meet the requirements for $150 each.

ARPC Jobs and Privileges

ARPC holders work in marketing and sales in the retirement field. Earning the APRC designation allows the holder of the certificate to use the ARPC certification logo on business cards and stationery. Beyond that, there are not particular powers or privileges associated with holding this designation.

Comparable Certifications

There are several other professional designations that can be earned by financial services workers in the retirement field.

Accredited Retirement Plan Specialist (ARPS) is a SPARK designation for administrative and recordkeeping professionals working in retirement plan operations. Similar to the ARPC certificate, ARPS holders have demonstrated a year of experience and the ability to pass an exam.

Certified Retirement Counselor (CRC) is offered by the International Foundation for Retirement Education. Applicants can earn the certificate by registering and passing a four-hour 200-question exam that costs $520.

Bottom Line

Sales and marketing professionals working in the retirement plan industry can demonstrate their proficiency at designing employer-sponsored retirement plans by earning the ARPC designation. Earning the certificate requires having a year of relevant experience, obtaining a letter of recommendation and passing an exam. The designation, which is not particularly common among financial professionals, can also be earned by college students.

Tips on Retirement

  • Consider working with a financial advisor to develop, implement and fine-tune a personal financial or estate plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • Are you saving enough for retirement? SmartAsset’s award-winning retirement calculator can help you determine exactly how much you need to save to retire.

Photo credit: ©iStock.com/South_agency, ©iStock.com/Andrii Dodonov, ©iStock.com/kupicoo

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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How to Retire in Austria: Costs, Visas and More

How to Retire in Austria: Costs, Visas and More – SmartAsset

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From Oktoberfest to the Salzburg Summer Festival, Austria seems to have festivities year-round. This German-speaking nation of some 9 million has a rich cultural heritage and can boast of such fabled composers as Wolfgang Amadeus Mozart and Ludwig van Beethoven, among others, as former residents. Citizens and visitors also come to Austria for the Alps, which offer some of the best snow skiing in the world. As you weigh whether to retire in Austria consider working with a financial planner to make sure you can afford it and handle your taxes in the most efficient way possible.

Cost of Living and Housing in Austria

The cost of living and housing in Austria is very similar to the U.S. In general, consumer prices are 6% higher in Austria, according to Numbeo, a cost-of-living database.

However, rent prices in the U.S. are about 44% higher, on average, than in Austria, so your housing costs could be significantly lower if you decide to live in Austria. Compare rental costs in Vienna and New York City: If you choose to rent a one-bedroom apartment in the heart of New York, you will likely pay about $3,415 per month. The same apartment in the heart of Vienna costs about $1,089 per month. A three-bedroom in the heart of New York City costs about $6,610 per month, and the same apartment in Vienna costs about $1,969 per month.

If you choose to purchase an apartment in Vienna, you can expect to pay about $845 per square foot in the city center. The cost outside of the city center is about $504 per square foot.

Retire in Austria – Visas

Austria offers several visas to Americans, but the most popular one for retirees is a settlement permit. To qualify for a settlement permit, a person must prove that he or she has sufficient funds, health insurance and a place to live.

Additionally, Austrian residency requires a language test to prove that you comprehend the German language. The settlement permit is for financially independent individuals who do not intend to work while in Austria. You may apply while in the country on a tourist visa or while still in the U.S. It is best to work with an immigration lawyer as the application process is entirely in German and can take several months.

Retire in Austria – Healthcare

Austria has affordable access to high-quality facilities for most residents, citizens and visitors. According to Knoema, an index that assesses the countries with the best healthcare globally based on life expectancy and health expenditure, Austria ranks 27th. In comparison, the U.S. ranks 49th.

Private health insurance in Austria costs about $240 per month, and a doctor’s visit may cost you up to $70. You must obtain health insurance to get a residence permit or settlement permit, and you can purchase health insurance policies for expats from Austrian or American companies.

Retire in Austria – Taxes

All U.S. citizens are generally required to file a tax return each year regardless of whether they are in the country or not. The foreign earned income exclusion (FEIE) can be applied depending on how much time a person spends outside of the country. For example, on your U.S. expatriate taxes you can exclude up to $105,900 of your 2019 foreign earnings.

If you earn an income while in Austria, that income may be taxed up to 55%. However, your foreign earned income will not be taxed by Austria. Therefore, your tax on your retirement income will be taxed as it would be if you were in the U.S., and any income you earn in Austria will be taxed separately.

Retire in Austria – Safety

The 2020 Gallup Law and Order Index ranks this Central European nation as the sixth safest in the world. According to the U.S. Department of State, Austria has low crime threats and is one of Europe’s lowest-crime countries.

The most common crime experienced by U.S. citizens is purse and wallet snatching, typically in crowded public areas, according to the State Department. Other crimes of opportunity occur in trains, restaurants, shopping areas and crowded tourist areas where criminals distract a victim who usually was not in direct physical control of valuables.

In general, road safety is not a concern. The threat of terrorism, though, is currently listed as Medium when directed to or affecting official U.S. government interests.

The Takeaway 

Austria ranks among the top three most livable countries, according to the Global Peace Index. In fact, a recent study by the Economist Intelligence Unit ranked Vienna as the most livable city on Earth. This city alone offers a seemingly endless array of museums, fine art and world-renowned architecture. The cost of retiring in Austria will be similar to the cost of retiring in the U.S. So whether you choose to waltz through Vienna or ski in Innsbruck, this land-locked country, which shares borders with Italy, Switzerland, Germany and Hungary, has a retirement lifestyle for almost everyone.

Tips on Affording Retirement

  • Consider working with a financial advisor about the cost of retiring abroad. Finding a financial advisor doesn’t have to be hard. The SmartAsset matching tool can connect you to several advisors in your area in just minutes. If you’re ready, get started now.
  • Many American will be able to retire in Austria on a combination of their Social Security benefit and a pension. You can use a free Social Security calculator to see what to expect from Uncle Sam in retirement.

Photo credit: ©iStock.com/benedek, ©iStock.com/Marcin Wiklik, ©iStock.com/CHUNYIP WONG

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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Compounding Your Savings For Retirement | Discover

With compounding interest, you can build your savings faster—and save even more.

In olden days, people stashed away extra money in their mattresses or cookie jars which is not a good idea if you have a flood or fire or even a lapse in memory. Fortunately, you now have many choices for storing your money—in reliable retirement accounts. These choices not only provide stability and security, but also give the important bonus of earning interest and compounding the value of your money, which means increasing the value of your retirement savings well beyond the amount you have deposited.

How Compound Interest Works

When you have money in an account with compound interest, it allows you to build upon your savings quickly because you earn interest not only on the amount you have contributed, but also on the interest you have earned in prior periods. Within each period you’re earning interest on the total balance in your account, not just on what you have managed to save. With this in mind, saving early is critical to meeting your retirement goals. Saving early can also reduce the need for you to contribute large sums to your savings as you near retirement.

Couple riding bikes along the water

As an example, if you put $1,000 into an account with simple interest of 2.34% Annual Percentage Yield (APY), you will have $1,702 after 30 years. If, however, you have that same $1,000 in an account with compound interest of 2.34% APY, you will have $2,018 after 30 years.

Now let’s talk about how to save for retirement.

Choices For Retirement Accounts

Once you start saving for retirement, you have several choices of retirement accounts: 401(k), Roth IRAs or Traditional IRAs.

  • 401(k). Many companies now offer 401(k) savings opportunities for employees rather than pensions. With a 401(k) you have money withheld from your paycheck for a retirement account managed by the company’s financial partner. Often your contributions are withheld pre-tax, lowering the amount of taxable income in your paycheck and maximizing the amount you contribute to your retirement account. Also, it is common for companies to match a percentage of your total contribution.
  • Roth vs. Traditional IRA. The Traditional IRA is funded with pre-tax funds, meaning that you don’t pay tax on the money that you put into this account now, but you will pay tax on it when you withdraw the funds from your account later on. The Roth IRA is taxed up-front, so you don’t get a tax savings on your deposit now but you won’t pay taxes on qualified distributions in retirement. Check with your financial or tax advisor for help making the best choice for your personal needs.

Whichever path you choose, try to set up regular salary contributions with a fixed amount from every paycheck going into your retirement account. The IRS has a limit on annual contributions based on age and marital status, so check to see what applies to your personal and family situation to avoid overestimating the amount you can contribute.

Couple looking at compounding interest calculations on a mobile phone

IRA Interest Rates/APY

Because retirement accounts are established to meet long-term savings goals, banks and other financial institutions typically consider retirement accounts to be less risky than other consumer deposit account types, such as savings and money market accounts. What that means for you is that banks may offer slightly higher IRA interest rates than regular savings accounts rates. This is another way that retirement accounts make your savings grow faster.

Any financial institution will give you current information on IRA interest rates or APY. They can’t predict the future, but with a fixed-rate IRA CD, you know exactly what interest rate your money will earn over the term you select. Like other consumer savings accounts, IRA deposits are protected by FDIC insurance, to the maximum allowed by law, making them far more secure than the money in your mattress.

The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. Please consult your tax advisor with respect to information contained in this article and how it relates to you.

Source: discover.com

How to Retire in Denmark: Costs, Visas and More

How to Retire in Denmark: Costs, Visas and More | SmartAsset.com

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If happiness is contagious, think about retiring in Denmark. Danes are routinely held to be some of the world’s happiest. Indeed two of the top five cities in a global survey of happiest cities are in this tiny Scandinavian nation. Perhaps that’s due to the country’s generous social safety net. Or maybe it’s Danish devotion to outdoor recreation and culture. Children’s book author Hans Christian Andersen, composer Carl Nielsen, tennis star Caroline Wozniacki and some of the world’s most avid sailors all hail from Denmark. Its capital, Copenhagen, is the most bike-friendly city in the world and home to the second-oldest continuously operating amusement park, the 177-year-old Tivoli Gardens. Here’s what you need to know about visas, healthcare and cost of living in this nation of some 6 million, virtually all of whom speak English.

Cost of Living and Housing in Denmark

Like its neighbors, Denmark is generally more expensive than the U.S. Consumer prices are 28% higher in Denmark than in the U.S., according to Numbeo, a cost-of-living data base. However, the cost of renting is lower than in the U.S., but purchasing a home may prove to be more expensive depending on where you choose to live.

You could expect to pay about $3,415 per month to rent a one-bedroom apartment in central New York City and about $2,000 for a one-bedroom outside of Manhattan. In Copenhagen, a one-bedroom apartment costs about $1,671 per month in the city center and about $1,302 outside the center. If you want a bit more space, a three-bedroom apartment in central Copenhagen costs about $2,930 per month and about $2,218 per month outside the city center.

If you want to purchase an apartment in Denmark, the average cost is about $551 per square foot. In central Copenhagen, an apartment costs about $727 per square foot. Outside of the city center, you can expect to pay about $510 per square foot.

Retire in Denmark – Visas and Residence Permit

If you plan to retire in Denmark, you’ll need more than just a tourist visa. If you plan to stay in Denmark for more than three months, you’ll be required to get a long-term visa. Denmark does not offer a retirement visa, so you will have to get a student visa, a worker visa or a Danish citizen’s partner.

The most common option for American retirees is the worker visa or the partner visa. A partner visa is relatively straightforward. If you are married to or in a long-term partnership with a Danish citizen, they can sponsor your visa.

If you want to work in Denmark, you must apply for a residence and work permit in Denmark. You must have a company that is willing to sponsor you and provide information on your work and personal history to be considered for a visa. You can find all the requirements on the New to Denmark website.

Retire in Denmark – Healthcare

The World Health Organization ranks Denmark’s healthcare system as the 34th best in the world (out of a total of 191 countries), which is slightly better than America’s rank of 37. The World Population Review ranks the health of Danes as the 23rd best in the world.

The healthcare system in Denmark is universal and decentralized. The government provides money from tax revenues to all the regions and municipalities to ensure that health services are delivered throughout the country. Therefore, non-taxpayers are not automatically enrolled in the system and must pay with private insurance or out of pocket.

Denmark has a social healthcare scheme called the Danish Health Security Act. It covers foreign nationals who stay in Denmark for over three months, provided they are registered with Citizens’ Services and have a CPR (Det Centrale Personregister) number. If a person is not yet covered or does not have access to a CPR number due to their visa status, the Danish healthcare system will still see them if they have health insurance in their country or can cover their healthcare costs.

Retire in Denmark – Taxes

If you can get a work or spouse visa in Denmark, you will be taxed on your income from Denmark sources. Your tax rate will range from 8% to 56%, depending on your income.

Denmark also has a sales tax on items that can reach 25%. This is known as a value added tax (VAT). Additionally, capital gains taxes on investments in Denmark can be taxed between 27% and 42% of the gains, including bought and sold properties at a higher value. This is higher than most taxes in the U.S.

Additionally, American citizens are required to file expatriate tax returns annually. Your income earned in Denmark may be subject to tax, so be sure to work closely with an accountant or other financial professional to learn about the Foreign Earned Income Exclusion and other potential tax credits.

Retire in Denmark – Safety

In a global analysis of nations in which residents felt safe walking home, Denmark got the fifth highest score. And in the same study’s Law and Order Survey, Denmark got the sixth highest score. According to the U.S. Department of State, Copenhagen is a medium-threat location for crime.

Not only is crime significantly lower than in the U.S., but the superior public healthcare system is also widespread. Therefore, if someone is injured in physical activity or otherwise, excellent healthcare will always be available to citizens and foreign nationals.

The Takeaway

Denmark checks a lot of boxes for outsiders seeking a retirement home. The social safety net is about as strong as exists anywhere. Expats will find the country safe, civilized and full of encouragements to ride a bike, enjoy a beach, hike a centuries-old path through a conifer forest or hunker down on a cold evening to savor hot mulled wine – all with some of the world’s happiest people. (They might even help you pronounce difficult Danish phrases: try saying “red porridge” in their language.). The combined effect of these distinctly Danish pleasures is sometimes called “hygge,” a term that evokes international admiration.

Tips on Affording Retirement

  • Consider talking to a financial advisor about retiring overseas. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors to help you achieve your financial goals, get started now.
  • Retiring in Denmark has many intricacies. In general it’s more expensive than the U.S. But your Social Security and, if you have it, a pension could cover the costs. You can estimate your benefit amount with this Social Security calculator.

Photo credit: ©iStock.com/scanrail, ©iStock.com/pixdeluxe, ©iStock.com/Westersoe

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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About Our Retirement Expert

Have a question? Ask our Retirement expert.