If You Retire at 65 in These States, You May Run Out of Money

Your retirement savings could be going, going, gone in one of these states.

Financial influencer Graham Stephan recently shared some alarming new research. In multiple states, even if you retire with $1 million, your money could last 15 years or less. Due to the high cost of living in those states, there'd be a possibility that you run out of money.

Running out of money in retirement is a nightmare scenario that nobody wants to experience. Here's a closer look at the states where you're at the greatest risk, and an important counterpoint to this research.

Where retirement savings doesn't go very far

GOBankingRates used data from cost-of-living estimates and consumer expenditure surveys to determine how expensive retirement is in each state. Based on that, it calculated how long a nest egg of $1 million would last. Here are the states where it would run out the soonest:

• Hawaii: 10.9 years
• New York: 13.8 years
• California: 15 years

Considering retirement can last for decades, you definitely don't want to only have enough money for 10 to 15 years. While Hawaii, New York, and California had the highest average expenditures for retirees, there were also far more affordable states. Here are the ones where retirement savings go the farthest:

• Mississippi: 25.3 years
• Oklahoma: 24.8 years
• Kansas: 24.6 years

The fine print

Before getting too worried about this news, it's important to go over the math behind these numbers. The analysis simply divided $1 million by each state's estimated annual expenditures for those 65 and older.

For example, in Hawaii, average annual expenditures were $91,684.73. When you divide $1 million by $91,684.73, you get 10.9, hence 10.9 years for that money to run out.

There's one big problem -- this assumes you're getting a 0% return on your money. In this scenario, you haven't invested your money. You also haven't stuck it in the bank, because even the worst bank account ever will probably get you at least a little interest.

The data is essentially based on how long your money would last if you decided to keep $1 million in a safe or under your mattress. It's safe to say that most people wouldn't do that. And if you put your money anywhere that it can grow, it changes the math. Your savings will then last significantly longer, especially if it's invested.

How to avoid running out of money in retirement

Even if this data on how quickly your money will run out is fairly simple, it still makes a good point about personal finances in retirement. Your money may run out if you don't have enough saved, and you'll go through it much more quickly in high-cost states.

So, how can you avoid this? First, make sure you're saving enough. A helpful rule of thumb is to save at least 15% of your income for retirement. However, the correct amount also depends on your age and the amount you want to save. For example, if you want to retire with $1 million, it could take anywhere from $116 to over $2,600 per month in savings, depending on how old you are when you get started.

Here are some additional tips that can help your retirement savings last longer:

• Keep a portion of your portfolio in stocks. Retirees normally shift more to bonds for stability, but continue to invest in stocks for their growth potential. A 60:40 split between stocks and bonds is a popular choice for retirees.
• Consider moving somewhere cheaper or downsizing. Many people move to another state or even retire abroad to stretch their money further. You could also consider downsizing, especially if your children have moved out and you don't need as much room anymore.
• Plan ahead to save on taxes. It's normally a good idea to fund a Roth IRA, which offers tax-free withdrawals in retirement.
• Make sure you have the right insurance. Health insurance is a must for retirees, and you may also want to get long-term care insurance. An estimated seven in 10 Americans will need long-term care at some point, and without insurance, this can cost thousands of dollars per month.

The best way to be comfortable in retirement is to plan and prepare for it now. With consistent saving and investing, you'll be able to build a nest egg that can last for decades. And if you're worried about the cost of living in your state, you could start thinking about more affordable places to live.