Geo-Arbitrage: Moving to Cheaper States to Retire Sooner

Affordability continues to be a significant driver for Americans to pick up and move to a new state. A 2024 National Association of Realtors survey found that 21% of Americans moved to get “more home for the money,” highlighting affordability as a major relocation driver.

With remote work becoming more common and housing costs rising in many parts of the country, more Americans are turning to geo-arbitrage. The concept is simple: move from a high-cost area to a lower-cost one to stretch your income, savings, or retirement funds further.

Lower housing prices, taxes, and everyday expenses can significantly reduce your cost of living. For many people, that difference can help them retire sooner or make their retirement savings last much longer. WorkMoney put together a guide on what people should consider with geo-arbitrage, and how you can make this strategy work for you.

What Is Geo-Arbitrage, and Where Do People Go?

Geo-arbitrage is simply moving somewhere with a lower cost of living. Cheaper is typically defined by large expenses like housing and taxes, but others costs worth considering include utilities, food, entertainment, and others. This can be a great strategy for either people currently working, and even better for those that are retired. 

For some, it’s a choice, while others are forced to move due to cost. A recent survey indicated a third of respondents moved to a different city (38%) or to a different state altogether (34%) to lower their living expenses.

Florida has always been a popular place for retirees with low costs, warm climate and favorable taxes. However, other states like Arizona and North Carolina have emerged as spots for people to live their post-working years. And it’s not a small number of people moving states either – nearly one million people in 2023 over the age of 60+ made a new state home. 

Moreover, with the rise of remote work flexibility, the states that have largely been known as retirement states have become popular destinations for workers and active families simultaneously. 

Why Moving Can Accelerate Retirement

Reducing your overall cost of living by making a move is not a new concept, but it’s becoming more and more favorable as some states become significantly more expensive than others. Costs like healthcare, property taxes, insurance premiums, and everyday expenses like groceries and utilities make a significant impact on a monthly budget. 

Kiplinger recently published how much you need to retire within each state. The most extreme numbers are the following: In Oklahoma, you need roughly $735,000. In Hawaii, you need nearly $2.2 million.

In short, the formula of living and working in a higher cost of living state, retiring, and then moving to a lower cost of living state continues to work for many.

Calculating the Break-Even Point for Moving

Moving to a lower-cost state or city can reduce your expenses—but relocating itself isn’t cheap. Before making the jump, it’s important to calculate whether the move will actually save money over time.

Start by estimating the one-time costs of moving. These typically include moving services, realtor commissions if you sell a home, closing costs on a new property, travel to your new location, and temporary housing if there’s a gap between homes. Smaller expenses like utility deposits, storage, and setting up a new household can add to the total.

You can estimate the payoff timeline with a simple formula:

Break-even timeline = Total moving costs ÷ Annual cost savings

For example, if a move costs $18,000 and the new location saves you $7,200 per year in housing, taxes, and insurance, the move pays for itself in about 2.5 years. 

As you begin contemplating moving, be sure to shop around for the best (and most cost-effective) moving company. Moving costs can range drastically based on how far you’re moving and how much you’re taking with you.

Moving Savings Checklist

Before committing to a move, it’s important to look beyond home prices and consider the full financial picture. Cost differences between states and cities can be significant, but they often show up in areas people don’t immediately think about. Running through a simple checklist can help you identify where the real savings—or unexpected costs—might be.

Taxes and policy differences

State and local taxes can dramatically change your annual expenses. Compare state income tax rates, sales taxes, and property taxes before relocating. Each of these can have a significant impact on where you choose to live.

Insurance and utilities

Insurance costs vary widely depending on location and risk factors. Homeowners' insurance in hurricane-prone or wildfire-prone areas can be dramatically higher than in other regions. Utility costs can also shift based on the price of energy in your new area.

Local incentives and rebates

Some states, cities, and utility providers offer financial incentives that can reduce the cost of living. Energy rebates for solar panels, appliance upgrades, or home efficiency improvements can lower long-term expenses. A few communities even offer relocation incentives or tax breaks for new residents, which are worth researching before signing a lease or mortgage.

Healthcare and services

Despite similar care, your location can make a large difference in how much you spend each year on. In 2020, Utahns spent roughly $7,500 while New Yorkers nearly doubled that figure to $14,000.

As you’re considering a move, be sure to research local hospital systems, specialist availability, and whether major insurance or Medicare networks are widely accepted in the area. Lower-cost locations aren’t always cheaper if healthcare access is limited or requires frequent travel.

Cost of everyday living

Finally, look at the daily expenses that add up over time. Transportation costs, grocery prices, dining, and basic services like internet or home maintenance can vary more than expected between regions. Even modest differences in these everyday categories can add up to thousands of dollars in savings—or additional costs—each year.

Who Geo-Arbitrage Makes Sense (And Doesn’t)

Here’s a simple pros and cons list of when geo-arbitrage, or simply moving to save money, makes (and possibly doesn’t) make sense.

Final Thoughts

In 2024, about 37 million people changed residences, according to U.S. Census mobility data. So if you’re considering moving, know that moving is part of the American culture and fabric. Yes, it can be intimidating, and moving to a new place can evoke some sharp emotions.

But if you’re looking to geo-arbitrage to live a more financially fruitful life, know that your wallet (and your future self) will likely thank you.