Rena is three years away from retirement, and she’s being proactive about planning out exactly what she wants her golden years to look like. She dreams of moving back to New York City and living in Manhattan, where she lived in her 20s.
She is worried that her dream, however, may not be realistic. She wants to live in Manhattan because of its vibrant arts and culture, walkability and public transit infrastructure, world-class healthcare and ample opportunities to volunteer and build community. It’s important to her that she lives in a city where she doesn’t need a car. She’s single, has never been married and has no children.
Of course, New York City, and Manhattan in particular, is one of the most expensive places to live. It also boasts the most expensive housing market in the U.S.
Rena wants to know whether her retirement savings, pension and Social Security will be enough for her to buy a small apartment in Manhattan, and afford the cost of living in the Big Apple.
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Will your savings last?
Rena has $600,000 in cash that she was planning to use to buy her Manhattan dream apartment. She has an additional $250,000 in retirement savings.
She’ll get a modest pension of about $1,000 a month in retirement. And if she starts Social Security at 65, she can expect to receive roughly $1,900 a month.
Rena has seen listings for studio apartments around $500,000, and wonders if adding another $100,000 to her savings would be enough to last for her retirement, when coupled with her monthly benefits.
Fees in the city that never sleeps
But what is the average cost of a smaller apartment in Manhattan, and is this something Rena can afford?
Prices vary widely in Manhattan depending on the neighborhood, but Rena’s budget of $600,000 may be able to secure her a small apartment. Condo prices may be more out of reach, with the average sitting at $850,000 by some estimates, (1) and $1.2 million by others. (2) Studio-size condos can be had for $770,000.
Prices for co-op housing units are more within Rena’s price range, with average studios, by some estimates, costing from $460,000 to $470,000, and one-bedrooms at an average of $773,000. (3)
One thing Rena should keep in mind is that if she buys in a co-op, there’s the chance that assessments can happen, meaning building maintenance that requires owners to shell out for costly repairs.
She will also have to factor in homeowners’ association (HOA) fees and taxes if she purchases a condo, or if she buys a co-op, co-op fees (which bundle property taxes and some utilities). Condo HOA fees can average $3.20 per square foot in Manhattan, but often fall between $1 and $3 per square foot, which could mean $300 to $1,500 in monthly fees for a 300 to 500 sq. ft. studio. (4)
For co-ops, the average at the end of 2024 was $2.44 per sq. ft., which is generally lower than condo HOA fees, because of the inclusion of property tax and utilities.
Monthly fees would likely be lower than what Rena would pay if she decided to rent an apartment in Manhattan. New York City is one of the most expensive cities for renters in the U.S., with the average rent at $4.050 a month. For a studio apartment, average rent is $3,273 per month. (5)
The cost of living in New York is also higher than most places in the country, and is something Rena needs to factor in. Even though she won’t need a car, she will still be faced with a monthly cost-of-living spend of at least $1,700, but likely higher when factoring in that food, health care and goods and services are all more expensive in NYC versus the national average.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Crunching the numbers
Rena needs to take a hard look at what her cost of living is likely to be in Manhattan. She also needs to plan to have savings that will last her at least until she is 87 (the life expectancy of women).
Were Rena to use the 4% rule to draw down her retirement savings, assuming a total of $350,000, her withdrawals would only be $14,000 a year. Supplementing that with an estimated $2,900 in combined pension and benefits, she would have an annual income of $48,800. It’s not an unlivable amount, but it’s also not going to go as far as Rena may like in one of the most expensive cities in the U.S.
Rena should also consider whether she will have enough savings for medical expenses, including the possibility of having to pay for long-term care, and whether her Manhattan apartment will be accessible and allow her to age in place.
She should also consider speaking with a financial advisor about her plans. While rents are high in Manhattan, it’s possible that, should Rena find an affordable enough rental, it may also make financial sense for her to rent an apartment and invest her savings, instead of buying a home.
Does it need to be New York, New York?
Rena should also consider other places to live during retirement, in case the move to NYC doesn’t end up making financial sense for her.
Americans often choose places to retire that have activities for retirees, a good quality of life, access to health care and tax advantages. Florida and Arizona are popular choices, as reflected in a recent study that listed the best U.S. cities to retire in — with three of the top five being in Florida. (6)
Florida’s warm weather is an obvious factor in making it a retirement hotspot, but it also has no income tax and a large number of retirement communities. In New York, Rena will have to pay state and city income tax.
If moving south is something Rena doesn’t want to consider, she may look at other cities that are walkable, like New York, and still have vibrant cultural scenes, but have less expensive housing and cost of living expenses.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Homes.com (1); Castle Avenue (2); Brown Harris Stevens (3); Robert DeFalco Realty (4); Apartments.com (5); USA Today (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.