You can retire comfortably on $3,000 a month in retirement income by choosing to retire in a place with a cost of living that matches your financial resources. Housing cost is the key factor. It’s both the largest component of a retiree’s budget and it’s the household cost that varies the most according to geography. Choosing from among the U.S. cities with the lowest housing cost is a sensible first step to finding a place to retire at $3,000 a month. A financial advisor can help you choose the right retirement location that matches your budget.

Geographic Cost of Living Factors

Whether or not spending $3,000 a month on your retirement budget is a good idea largely depends on choosing a location with affordable housing costs. According to the Social Security Administration’s Expenditures of the Aged Chartbook, 2020, housing accounts for more than one-third of a typical retiree’s budget.

In fact, at 36.8%, housing expenses take up a larger share of retirement spending than the next two biggest categories combined – out-of-pocket healthcare costs (14%) and a miscellaneous category (17.5%) that includes everything from education and reading to alcohol and tobacco.

A 2022 report by the Federal Bureau of Economic Analysis (BEA) on personal consumption expenditures examined regional price parity (RPP) across states and metropolitan areas, including housing rents. The report highlighted that areas with higher RPPs tend to have higher overall living costs, particularly for housing.

Among major expenses, housing costs are the most variable. The BEA’s rankings of nearly 400 cities showed that Johnstown, Pennsylvania, had the lowest housing index at 43.8, while San Jose-Sunnyvale-Santa Clara, California, topped the list with a staggering housing index of 241.1 – more than five times higher.

Cities With Lowest Housing Costs

With this in mind, when you’re looking for a city where you can retire for $3,000 a month, it can be a good idea to start with the cities with the lowest housing costs. Here are the 20 U.S. cities with the lowest housing costs, ranked from least expensive to most expensive, according to the BEA analysis:

1. Johnstown, PA
2. Monroe, LA
3. Springfield, OH
4. Decatur, AL
5. Florence-Muscle Shoals, AL
6. Anniston-Oxford, AL
7. Sumter, SC
8. Gadsden, AL
9. Carbondale-Marion, IL
10. Enid, OK
11. Rocky Mount, NC
12. Wheeling, WV-OH
13. Pine Bluff, AR
14. Weirton-Steubenville, WV-OH
15. Parkersburg-Vienna, WV
16. Dothan, AL
17. Lawton, OK
18. Fort Smith, AR-OK
19. Houma-Thibodaux, LA
20. Owensboro, KY

Ranking Cities by All Costs

While for a typical retiree, housing will be the biggest cost consideration, it’s only part of the entire budget for a household. For a broader look at a low cost of living, here are the cities with the lowest price index on all items measured by the BEA, including goods, utilities and other services. They are ranked from least expensive to most expensive.

1. Anniston-Oxford, AL
2. Gadsden, AL
3. Morristown, TN
4. Florence-Muscle Shoals, AL
5. Jackson, TN
6. Kingsport-Bristol, TN-VA
7. Las Cruces, NM
8. Dothan, AL
9. Decatur, AL
10. Monroe, LA
11. Johnstown, PA
12. Sumter, SC
13. Carbondale-Marion, IL
14. Springfield, OH
15. Great Falls, MT
16. Lewiston, ID-WA
17. Jonesboro, AR
18. Johnson City, TN
19. Owensboro, KY
20. Youngstown-Warren-Boardman, OH-PA

General City Cost Considerations

The low-cost locations tend to be in the South or Midwest, and all are smaller metropolitan statistical areas. Major metropolises and cities in Hawaii, California and in the Northeast and Pacific Northwest tend to be the most expensive.

Non-metropolitan rural areas are not broken down into individual areas but, overall, they are less costly than the average city. These non-metropolitan areas have housing indexes averaging 59.9 and overall cost indexes averaging 89.

An Example $3,000 Retirement Budget

Here’s how your spending might break down for a retirement budget of approximately $3,000 a month. The percentages are based on Social Security’s analysis of typical retirement-age household expenses.

Bottom Line

Picking a place to live on $3,000 a month in retirement income is largely a matter of picking a place with low housing costs. Housing is the largest and the most variable expense in the typical retiree’s household budget. Many smaller cities, often in the South and Midwest, have housing costs little more than half as high as the average and often a small fraction of the level in the most expensive cities.

Tips for Retirement

• You shouldn’t have to plan for retirement alone. You can use the help of a financial advisor to help you properly prepare no matter what your budget looks like. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Use SmartAsset’s Cost of Living Calculator to compare living expenses in two cities you are considering for retirement.  

Photo credit: ©iStock.com/Liubomyr Vorona, ©iStock.com/lucigerma, ©iStock.com/Ricardolmagen