Cost of Living for Retirees: A Guide to BEA RPP for Retirement Planning
Retiree spending differs from the working-age average. A framework for using BEA data to evaluate retirement relocation, with worked examples.
Retiree households spend differently from the average household, more on healthcare and housing, less on transportation and work-related costs. Using BEA's all-items RPP without adjusting for these patterns can produce misleading retirement-relocation comparisons. Apply retiree-specific weights to the component RPPs, layer in healthcare access and state retirement-income tax treatment, and the picture sharpens considerably.
How Retiree Spending Differs From the Average Household
The Bureau of Labor Statistics Consumer Expenditure Survey provides detailed spending data by age group. The patterns for households headed by someone 65 or older differ in predictable ways from younger households:
- Housing. About 33% of spending on average for older households, similar to the national average. But the composition differs: more property tax and maintenance, less mortgage principal and interest for households who own outright.
- Healthcare. Over 13% of spending for households 65+, compared to 6-8% for younger households. Out-of-pocket healthcare cost (monthly cost, copays, prescriptions, dental, vision) rises sharply with age.
- Transportation. Lower than for working-age households, typically 13-15% of spending compared to 16-18%. Retirees commute less and may run fewer vehicles.
- Food at home. Slightly higher share than working-age, typically 8-10% of spending. Retirees eat more meals at home than working professionals.
- Food away from home. Lower share. Retirees eat out less often than working-age households on average, though high-income retirees can be exceptions.
- Personal services. Often higher, household services (lawn care, cleaning), personal care, and entertainment.
- Work-related expenses. Largely zero. No commuting clothing, work-from-home equipment, professional dues, etc.
- Child-related expenses. Largely zero, unless grandchildren are dependents.
These shifts add up. A retiree applying the national-average RPP weighting will systematically misestimate cost-of-living differences between candidate metros. A more accurate comparison weights the components to match retiree-typical spending.
Building a Retiree-Adjusted RPP
Take BEA's component RPPs (rents, goods, services) and apply retiree-typical weights. Suppose a retiree household spends:
- 35% on housing (rents component if renting; for homeowners outright, weight property tax differences instead)
- 13% on healthcare (services component)
- 13% on transportation (services + goods mix)
- 9% on food at home (goods component)
- 4% on food away from home (services component)
- 5% on personal services (services component)
- 21% on other (mix of goods and services)
Apply these weights to the metro's component RPPs. For a metro with rents RPP 90, services RPP 95, and goods RPP 96:
Retiree-adjusted RPP = (0.35 × 90) + (0.13 × 95) + (0.13 × 95) + (0.09 × 96) + (0.04 × 95) + (0.05 × 95) + (0.21 × 95) ≈ 93.5
Compare to the all-items RPP for the same metro, which might be 92 (similar but not identical). The retiree-adjusted figure pulls slightly higher because services prices, which include healthcare, are weighted more heavily than the population average.
For a metro with rents RPP 160, services RPP 115, and goods RPP 105 (typical of an expensive coastal market), the retiree-adjusted RPP would land around 130, substantially above the all-items number for the same metro and above the average younger-household experience there.
The Healthcare Cost Layer
BEA's services RPP captures average healthcare price levels but does not adjust for the specifics of retiree healthcare access. Three layers of healthcare cost matter for a retiree relocation decision:
Medicare-related costs
Medicare monthly cost (Part B and Part D) are uniform nationally. Medicare Advantage plan monthly cost and benefits vary by ZIP code. A retiree moving from a Medicare Advantage market with rich plan competition to one with thin competition may face higher out-of-pocket costs even if BEA's services RPP for the destination is lower.
Medigap supplemental insurance
Medigap (Medicare Supplement) monthly cost vary substantially by state, and some states (Connecticut, Massachusetts, New York, Vermont) have community-rated Medigap markets that produce different premium dynamics than the rest of the country. A retiree moving between Medigap markets should price the change separately from the BEA RPP comparison.
Healthcare access and provider availability
BEA RPP measures price levels but not access. A metro with cheap healthcare on paper can have long specialist wait times, limited primary-care availability, or a thin hospital network. For retirees with chronic conditions or complex care needs, access can matter more than headline cost. The Health Resources and Services Administration's Health Professional Shortage Areas (HPSA) designations identify access-constrained markets.
State Tax Treatment of Retirement Income
Beyond price levels, state tax treatment of retirement income materially affects retiree real disposable income. The relevant categories vary by income source:
Social Security taxation
Most states do not tax Social Security benefits. As of 2026, only a small group of states still tax Social Security to any meaningful degree (Colorado, Connecticut, Kansas, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and rules in several of these are being relaxed). For a retiree with substantial Social Security income, state-level Social Security taxation can shift annual disposable income by thousands of dollars.
Pension income taxation
Several states fully exempt public-sector pension income; others partially exempt private pensions; some tax all retirement income at standard rates. Hawaii, Illinois, Mississippi, and Pennsylvania broadly exempt qualified retirement income; states like California and Vermont tax it at standard income-tax rates.
IRA and 401(k) withdrawal taxation
States that have no income tax (Florida, Texas, Tennessee, Nevada, Washington, Wyoming, South Dakota, Alaska, plus New Hampshire on wage income) do not tax IRA or 401(k) withdrawals. States with income tax generally treat these withdrawals as ordinary income.
Property tax
Many states offer homestead exemptions or senior property tax freezes that materially reduce property tax burden for older homeowners. A retiree planning to own a home should research the destination state's senior property tax provisions before estimating effective property tax cost.
Estate and inheritance tax
Twelve states and the District of Columbia levy an estate or inheritance tax with thresholds that vary widely. For retirees with substantial estates, the state-level estate tax exposure can shift relocation calculus.
These tax differences are not captured in BEA RPP. A retiree comparing candidate metros should layer state tax research on top of the RPP comparison.
A Worked Example: Phoenix vs Scottsdale vs Charleston
Suppose a retiree couple with $80,000 in annual income (Social Security plus modest IRA withdrawals) is comparing three candidate metros: Phoenix, Arizona; Scottsdale (within the Phoenix metro); and Charleston, South Carolina.
For BEA RPP purposes, Phoenix and Scottsdale are part of the same metro statistical area, so they share an RPP. The intra-metro variation is real but not captured by BEA, Scottsdale neighborhoods average significantly higher rents than Phoenix as a whole.
Phoenix metro all-items RPP: roughly 100 (national average). Charleston metro all-items RPP: roughly 100 as well, surprisingly similar headlines.
Component breakdown for Phoenix: rents RPP near 105, services RPP near 100, goods RPP near 100. For Charleston: rents RPP near 105, services RPP near 99, goods RPP near 96.
State tax: Arizona has flat 2.5% income tax (low) but does tax some retirement income. South Carolina has a graduated income tax up to 6.5% but offers a generous retirement income deduction (up to $10,000 per spouse over 65 plus full Social Security exemption). For a retiree drawing modest IRA income, South Carolina may be slightly more favorable on state tax than Arizona.
Property tax: Arizona's effective property tax rate is among the lowest in the country, around 0.6% of assessed value. South Carolina's rate is also low for owner-occupied homes (around 0.5% effective on owner-occupied with the state's Act 388 cap). Both are favorable for homeowners; the absolute dollar difference depends on home value.
Healthcare access: Both metros have substantial hospital systems. Arizona has the Mayo Clinic Phoenix campus and the Banner system; Charleston has the Medical University of South Carolina (MUSC) academic medical center. For retirees with specialist care needs, both metros score well.
Climate: Phoenix summers exceed 110°F, which raises both utility costs and quality-of-life considerations for retirees. Charleston summers are humid but rarely above 95°F. This is not a BEA RPP variable but matters for retirement decisions.
Net assessment: On pure BEA cost, the two metros are roughly equivalent for retirees. On retirement-income tax, Charleston has a modest edge for moderate-income retirees. On climate, Charleston is generally more comfortable. Phoenix offers proximity to the Mayo Clinic and a more golf-centric retiree economy. The decision is not driven by RPP alone.
Common Retiree Relocation Patterns
Snowbirds
Many retirees split time between two residences, a primary northern home and a winter southern home. For tax and cost purposes, this requires careful planning around state residency rules. The state where you spend more than half the year typically becomes your tax residence; some snowbirds intentionally structure residency to minimize state income tax.
Aging-in-place vs downsizing
Many retirees stay in their pre-retirement home rather than relocate. For these households, the relevant cost trajectory is local property tax growth, local services inflation (especially healthcare), and any state senior tax relief programs they qualify for. The all-items RPP for a familiar metro is mostly a benchmark; the year-over-year change matters more than the level.
Moving closer to family
Retiree relocation often follows family proximity rather than cost optimization. For these households, BEA RPP is useful as a sanity check on the financial impact of a chosen destination, not as a search criterion.
Active adult communities
The growth of active-adult retirement communities (Sun City, The Villages, etc.) means some retirees relocate to specific developments that have their own internal cost dynamics. The BEA metro RPP for the surrounding area is a starting point, but community-specific costs (HOA fees, amenity charges, intra-community services) need separate analysis.
Retirement-Income Stretch Across States
BEA's real personal income series, which adjusts personal income for local price levels using RPP, shows how a fixed nominal retirement income translates to real purchasing power across states.
A $60,000 retirement income (combined Social Security and IRA withdrawals) translates to roughly $66,000 of national-average purchasing power in Mississippi (state RPP near 86) and roughly $48,000 in Hawaii (state RPP near 113). The same dollar income produces very different lifestyles depending on where it is spent.
For retirees with modest fixed incomes, this geographic-stretch effect is one of the largest single financial decisions of retirement. A Mississippi-based retiree on $60,000 of retirement income enjoys roughly the standard of living that a Hawaii-based retiree would need $77,000 to match.
Where to Go From Here
Use the PlainCost state RPP directory to look up the all-items RPP for any candidate state. The metros directory drills into specific metropolitan areas. For comparison, the comparison tool shows side-by-side RPPs for two metros. The calculator converts a retirement income from one metro to its purchasing-power equivalent in another.
For retirement-specific tax research, every state's department of revenue publishes information on retirement-income taxation. The Social Security Administration publishes detailed information on benefit taxation by state. Centers for Medicare & Medicaid Services tools like Medicare Plan Compare let retirees see Medicare Advantage and Part D plan options for any ZIP code.
Frequently asked questions
How is cost of living different for retirees?
Retiree households typically spend more on healthcare and housing than the average working-age household, and less on transportation, childcare, and work-related costs. The all-items RPP averages costs across age groups, so retirees should weight the components by their actual spending pattern, heavier on services and rents, lighter on commuting goods.
What are the cheapest states to retire in based on BEA data?
On all-items RPP, the cheapest states are consistently Mississippi, Arkansas, West Virginia, Alabama, and Oklahoma, all running 12-15% below the national average. But cheapest is not always best for retirees, who also need to consider healthcare access, climate, family proximity, and state tax treatment of retirement income.
Do RPPs include healthcare costs?
Yes, healthcare is part of the services component of RPP. But retiree healthcare spending varies enormously by Medicare coverage, supplemental insurance, and individual health needs, much more than the average services RPP captures. For a retiree, layer specific healthcare cost data on top of the RPP comparison.
Should retirees prioritize low-rent metros?
Renters yes; homeowners less so. Retirees who own their home outright are largely insulated from current rent levels and can prioritize other factors. Retirees who plan to rent in retirement, downsize, or relocate to assisted living should pay close attention to the rents RPP for any candidate metro.
Does BEA publish a separate retiree cost-of-living index?
No. BEA's RPP uses national average household weights. The BLS publishes a Consumer Price Index for the elderly (CPI-E), but it is experimental and tracks inflation rather than geographic price levels. For retiree-weighted geographic comparisons, take BEA's component RPPs and apply your own retiree-specific weights.
Sources: U.S. Bureau of Economic Analysis, Regional Price Parities; U.S. Bureau of Labor Statistics, Consumer Expenditure Survey; Centers for Medicare & Medicaid Services, Medicare. Tax information is general; consult a qualified tax advisor for advice specific to your situation.
Last updated: May 2026
