Financial Advisor magazine is doing a series on what advisors say it costs to retire in many locations. See the end of this article for links to previous articles in the series.

Arizona is a retirement haven, but retirement there can mean anything from living in a planned community of mobile homes to living in a desert retreat. How much do retirees need to have saved to live in upscale Scottsdale?

Scottsdale is an affluent suburb of Phoenix where the median home price is $459,000 and the median home rental price is $2,100 a month, according to Zillow. Transportation is mostly by car rather than by public transportation. The combined state, county and local sales tax for Scottsdale is 7.95 percent, which is on the high end, and income tax ranges from 2.59 percent to 4.54 percent, which is about average for states with an income tax. The cost of living in Scottsdale, which relies on tourism and has more destination spas than any other city in the country, according to Money magazine, is 14 percent higher than the national average.

“Most advisors would tell people they need $1.5 million to live in an area like Scottsdale, but it is a lot more nuanced than that,” said Dennis R. Nolte, an advisor with Seacoast Wealth Management in Ovieda, Fla. “We sometimes scare people into saving more than they need to.”

Nolte said the $1.5 million ballpark figure is for a couple, and an individual could get by with a portfolio that was 25 percent to 30 percent less because of reduced expenses for entertainment, travel and food.

Seacoast Wealth Management has had several clients move to the Scottsdale area from either California or Florida. “It seems to be a new migratory pattern. If clients move from California their cost of living usually goes down, but if they move from Florida their cost of living goes up,” said Nolte. “We now have clients in Arizona for the first time.”

Breaking the numbers down, Nolte said, “Assuming your $2,100 a month in rent is about 28 percent of someone’s income, you'd need about $7,500 a month from all sources in gross income. With $2,500 a month in Social Security income and zero pension, that's a gross of $5,000 a month, or $60,000 a year that is needed. Also, assuming a 4 percent withdrawal rate from the portfolio, that means [you need] a portfolio of $1.5 million in assets. But it's a lot more nuanced than that. The $1.5 million portfolio is calculated on no reduction in principal and that all of the money is taxed and it does not include Social Security or the pension that some clients may have.”

“This requires a deeper discussion with the client, but it gets them thinking about where they might want to live in retirement, which is good to think about,” Nolte said.

Nina O’Neal, a partner with Archer Investment Management in Raleigh, N.C., said an individual expecting to live reasonably well in Scottsdale would need at least a $1 million portfolio.

“People have to plan for the same expenses in retirement that they had while working,” O’Neal said. “I have not seen any of those expenses go away when someone retires. A 60/40 portfolio of stocks to bonds may not be sufficient for the growth that will be needed, especially in a low-interest-rate environment. A retiree may need more equities, but for a decent retirement [in a place like Scottsdale] it would take at least $1 million portfolio.”

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