Biggest Retirement Expenses To Prepare for in Phoenix, Arizona

Biggest Retirement Expenses To Prepare for in Phoenix, Arizona

If you’re thinking of retiring to the Greater Phoenix, Arizona area, you’re not alone. Phoenix was the fourth most popular place for retirees to move in 2017, and one of its suburbs, Mesa, hit the Number 1 spot. And in Scottsdale, Arizona almost a quarter of the population is 65 or older, so you will be in good company.


In fact, three more areas in the Phoenix metropolitan statistical area (MSA) also made the list of top 10 cities for retiree relocation. Chandler was right behind Phoenix, in the Number 5 position, and Peoria and Gilbert brought up the seventh and eighth positions, respectively. No other MSA enjoys such a broad representation in the top 10 list.


Are you ready to start investing for your retirement? Contact ARQ Wealth Advisors to see how we can help!


It’s not hard to see why. Phoenix and its surrounding areas are sunny and warm all year round – earning its Valley of the Sun nickname. The city offers year-round recreation like golf, swimming, and hiking. Phoenix and the state of Arizona are beautifully scenic, with striking desert views and abundant palm trees. Phoenix also boasts multiple attractions for all tastes, including a symphony, art museums, and major league sports teams.


Planning for Retirement in Phoenix

But perhaps one of the biggest attractions for retirees is the city’s sheer affordability. Other places, like Southern California, are also sunny, warm and chock-full of attractions – but you’ll pay significantly more to live there than you will in Phoenix or Scottsdale. Southern California’s real estate prices are some of the highest in the country. Phoenix can track with or below the national average


Be sure to plan your retirement expenses, even if you are moving to a relatively affordable city. A general rule of thumb is that expenses in retirement will add up to as much as 80 percent of what they were before you retired. After all, if you commuted to work, you no longer will be. 


But in fact, every prospective retiree should realize that the rule of thumb is only that: it doesn’t fit every individual’s circumstances and plans. About one-third of retirees find their expenses actually rise in retirement, for instance. One big reason is that health and medical needs often climb as you get older. Plus, medical expenses are a fast-rising category of expense across the board to boot, whether your needs change or not. 


Another reason is that many categories don’t change that much. You’ll need utilities like lights, air-conditioning, and water just as much as you did before. In fact, you may be drawing on them more if you’re staying around the house a greater percentage of the time.


Individual goals and preferences might also lead you to spend more, too. If you want to travel extensively, for instance, you could need more money in retirement than you did before.


Ultimately, there’s no substitute for drawing up a budget for retirement expenses so you have a blueprint to meet your goals and dreams and a comparison in place for your estimated retirement income.


A qualified financial planner, such as the specialists at ARQ Wealth Advisors, can help you put together a plan for sustainable financial success. 


Your planner can help you plan for these large – but relatively affordable – retirement expenses in Phoenix:

  • Housing

This is nearly everyone’s largest expense later in life. Older people spend roughly 40 percent to 45 percent of their income on housing and related costs

The average retiree, across the nation, spends $1,322 on housing costs. If you own in Phoenix, you can track along with that, depending on the price of your home. The median home value is $230,493.

If you choose to rent in Phoenix, the expenses can be less than the national average. The median rent for a two-bedroom apartment ranges from $936 to $1,330. Perhaps that’s one of the reasons that roughly half the residents are renters.

And take a bow, property tax! The effective property tax rate is only 0.77 percent, below the U.S. average. 

  • Healthcare

Yep, it’s expensive. The average retiree spends roughly $500 per month nationally on healthcare expenses, and it can run higher than that if you need pricey prescription medication or other big-ticket health items. Be sure to factor in your individual expected health needs when planning. 

In addition, of course, be aware that even if you choose Medicare, health care premiums, deductibles and co-pays aren’t free, in Phoenix or anywhere else. Only Medicare Part A, which covers hospital stays, is available without payment of premiums. It will require deductibles and copays. All other parts of Medicare require premiums, deductibles, and copays, just as non-Medicare insurance does.

In addition, some Medicare plans don’t cover expenses such as eyeglasses and hearing aids.

But the good news is, Phoenix is relatively affordable versus the national average, by some measures. Its healthcare prices come in at 3 percent below the U.S. median.

However, if you’re covered under an employer’s health plan in Arizona, your costs could be roughly $108 higher every month than the national average.

  • Utilities

Nationally, retirees pay $2,060 per year on all utilities. This is one of the few categories in which your retirement expenses can be higher in Phoenix. In fact, Arizona has the sixth-highest electricity bills in the U.S. 

Across the state, residents’ electricity bills (one part of utilities) run at roughly $128 versus roughly $111 nationally per month. A big part of the reason, of course, is the wonderfully warm climate. The average monthly temperature is 86.7 degrees. 

  • Food

The good news in Phoenix continues with food costs. The average retiree in the U.S. spends roughly $483 per month on food. But those costs could be lower in Phoenix because food costs are lower. A gallon of milk, as just one example, can be up to $1.00 lower. Now, not all price differentials may be that significant, but they are widespread in Phoenix’s favor.

As a result, the percentage of income spent on food in Phoenix is 11%, versus the national average of 12.6%.

  • Taxes

Arizona is a relatively low-income tax state. The rates fall in a range of 2.59 percent to 4.54 percent, depending on your income and tax bracket. 

The sales tax can be high, however. The state itself levies 5.6 percent in sales tax, but counties and municipalities charge additional sales tax as well. The sales tax in Phoenix is currently 8.6 percent, which includes both a Maricopa County tax and a city tax. Other cities levy a sales tax of more than 11 percent.

The average sales tax in Arizona is 8.33 percent, which puts it at Number 11 among the highest sales tax states.


Financial Planning in Phoenix and Scottsdale

If you are ready to retire or are making the move ahead of retirement to beautiful Arizona, the financial professionals at ARQ Wealth are here to help with all of your financial planning and investment management needs. Contact us today for a complimentary financial review.

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