How Does Local Cost-of-Living Affect Retirement?


The brief’s key findings are:

  • Workers in high-cost areas of the U.S. earn more than those with similar skills in low-cost areas.
  • Earnings levels affect Social Security benefits, which replace a smaller share of wages for higher earners and do not account for local prices.
  • In response, households in high-cost areas might save more, work longer, or move to a low-cost area when they retire.
  • The results show replacement rates are lower in high-cost areas, but the gap is modest.
  • And households respond to this gap – especially the more educated – by saving more; and some homeowners move when they retire.

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