2022 Best States To Retire in for Tax Purposes

2025 Best States to Retire in for Tax Purposes

Many people consider relocating when they retire to reduce their cost of living and make their savings last longer. When weighing the pros and cons of moving to another state, it’s important to consider the total tax burden there, including state and local taxes on retirement income, property tax, even sales tax. Some areas with a lower tax burden have a higher overall cost of living, which can cancel out any savings.

Below we look at the best states to retire in for taxes and how to tell if moving will be worth it.

Key Points

•   Several states, including Alaska, Florida, and Texas, do not tax 401(k) income, making them attractive for retirees.

•   Mississippi, Tennessee, Wyoming, and others are among the most tax-friendly states for retirees.

•   States like Hawaii, Massachusetts, and California have high living costs, which can offset tax benefits.

•   Safety, healthcare access, family proximity, and lifestyle preferences are crucial in choosing a retirement destination.

•   Lower taxes may not always outweigh the high cost of living in certain states.

Most Tax-Friendly States for Retirement

A number of states exempt Social Security income from state taxes. A smaller number offer a tax break on other retirement income, such as IRAs and 401(k) plans, private pensions, interest, dividends, and capital gains.

These are the 10 tax-friendly states for retirees, according to Kiplinger:

1.    Mississippi

2.    Tennessee

3.    Wyoming

4.    Nevada

5.    Florida

6.    South Dakota

7.    Iowa

8.    Pennsylvania

9.    Alaska

10.    Texas

But before you complete that change of address card, you’ll want to look at the bigger picture.

Factors to Consider When Choosing the Best State to Retire In

When choosing where to retire, it’s wise to first consider issues like safety, access to healthcare, distance to friends and family, or living near other people of retirement age.

Make a list of features that are important to you in a retirement locale, and consider whether any of them could indirectly impact your cost of living, such as being close to friends and family.

Then look at the total cost of living in an area: housing, food, transportation, cultural activities, and other expenses. These retirement expenses generally have a bigger impact on one’s lifestyle than taxes.

Finally, to determine whether a state is tax-friendly for retirees, look at the following:

Does the State Tax Social Security?

Generally, Social Security income is subject to federal tax. But some states also tax Social Security above a certain income threshold, while other states offer tax exemptions for individuals in lower tax brackets.

For the 2024 tax year, the states that tax some or all Social Security benefits are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

Does the State Tax Pensions?

Many states tax income from pensions, but 15 states do not. These states are: Alabama, Alaska, Florida, Hawaii, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

And these 13 states do not tax income from 401(k) plans: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Alaska, Florida, Nevada, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax.

Other Taxes That Affect Retirees

When choosing the best state for you to retire in, it’s a good idea to look into sales tax and property taxes too. States that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. On the other hand, New Hampshire has very high property taxes, reducing the benefit of no sales tax.

Recommended: When to Start Saving for Retirement

States to Avoid When Retiring

Choosing the best state to retire in sometimes means making compromises. If safety and healthcare access are top priorities, for instance, you may not get your ideal weather. But for many retirees, a high cost of living is a deal-breaker.

Here are the 10 states with the highest annual cost of living, according to a 2024 analysis conducted by GOBankingRates:

1.    Hawaii: $131,560

2.    Massachusetts: $106,897

3.    California: $101,059

4.    New York: $91,865

5.    Alaska: $91,355

6.    Maryland: $85,007

7.    Washington: $84,642

8.    Vermont: $84,131

9.    Oregon: $83,693

10.    New Hampshire: $83,255

Recommended: Avoid These 12 Retirement Mistakes

The Best States to Retire in 2024

As noted above, the best state to retire in will depend on an individual or couple’s budget, lifestyle, and values. But recent trends may help point you in the right direction.

These are the top 10 states that retirees are moving to, according to United Van Lines’ 2024 National Movers Study:

1.    Delaware

2.    Florida

3.    South Carolina

4.    Arizona

5.    Mississippi

6.    Nevada

7.    North Carolina

8.    Maine

9.    Utah

10.    New Hampshire

If cost of living is your sole concern, the following are the 10 least expensive states, according to Bankrate:

1.    West Virginia

2.    Oklahoma

3.    Kansas

4.    Alabama

5.    Mississippi

6.    Missouri

7.    Arkansas

8.    Iowa

9.    Indiana

10.    Tennessee

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States with the Lowest Tax Burden

An area’s total tax burden is the sum of all property taxes, sales taxes, excise taxes (which affect the price of goods), and individual income taxes. Below are the states with the lowest total tax burden for retirees. (On a budget? Tools like an online budget planner can help you monitor spending and make progress toward your financial goals.)

Rank

State

Total Tax Burden

1 Alaska 5.16%
2 Delaware 5.52%
3 Tennessee 6.18%
4 Wyoming 6.47%
5 Florida 6.82%
6 New Hampshire 6.85%
7 Alabama 7.36%
8 South Carolina 7.48%
9 South Dakota 7.86%
10 Georgia 7.98%

States With the Most Millionaires

One way to measure the overall desirability of an area is the number of millionaires who live there. After all, millionaires can afford to live in states that have high-quality healthcare, nice weather, and diverse cultural offerings. These are not the cheapest states in terms of cost of living or taxes, but their popularity may help non-millionaires reevaluate their must-haves vs. nice-to-haves.

Rank

State

% of Millionaire Households

1 New Jersey 9.76%
2 Maryland 9.72%
3 Connecticut 9.44%
4 Massachusetts 9.38%
5 Hawaii 9.20%
6 District of Columbia 9.12%
7 California 8.51%
8 New Hampshire 8.47%
9 Virginia 8.31%
10 Alaska 8.18%
Source: Statista

Does It Make Financial Sense to Relocate in Retirement?

For workers who already live in a state with moderate taxes, are near family, and have a lifestyle they enjoy and can afford, there may not be any compelling reason to move. But for those looking to make a change or lower their retirement expenses, it may make financial sense to relocate.

Just remember that housing, food, transportation, and other expenses usually have a bigger impact on one’s retirement lifestyle than taxes.

Pros and Cons of Relocating for Tax Benefits

Lower taxes alone may not be enough to motivate someone to pick up and move house. Other factors should also support the decision.

Pros of Relocating for Tax Benefits

•   Potentially lower cost of living

•   Discovering a community of like-minded retirees

•   Possibly ticking off other boxes on your list

Cons of Relocating for Tax Benefits

•   Other living costs may cancel out the tax benefits

•   Moving costs are high, and the stress can be tough

•   Need to find another home

The Takeaway

The best state to retire in for tax purposes depends on an individual’s budget, lifestyle, and values. Some states with lower taxes for retirees can have higher housing and transportation costs, canceling out any tax benefit. A financial advisor can help you decide if saving on taxes is worth the expense and trouble of relocating.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What are the 3 states that don’t tax retirement income?

Nine states don’t tax retirement plan income because they have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Those states, along with Illinois, Iowa, Mississippi and Pennsylvania, don’t tax distributions from 401(k) plans, IRAs, or pensions. Alabama and Hawaii don’t tax pensions, but do tax distributions from 401(k) plans and IRAs.

Which state is the best state to live in for tax purposes?

Alaska has the lowest overall tax rates.

Which states do not tax your 401k when you retire?

Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax 401(k) plans when you retire.


Photo credit: iStock/Jeremy Poland

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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What Is Ego Depletion and How Do You Overcome It?

When it comes to maintaining a strong financial plan and healthy financial behaviors, our brains can sometimes work against us. Behavioral biases, mental traps, and neural wirings can all get in the way of setting and meeting financial goals.

Consider recency bias, which is the tendency for people to look to recent events to make decisions about the future. Just because a stock has skyrocketed recently, that doesn’t mean its upward trajectory will last forever. In fact, jumping into the market during a rally could mean you end up buying when prices are high, right before investors bail and prices fall.

Another mental tendency to consider: ego depletion. It’s the idea that people can only exert their willpower for a limited time, and after that, it’s harder to practice self-control. If you have an important financial decision to make, it may make sense to wait until you are no longer feeling depleted.

Here’s a closer look into the ego depletion theory, what it could mean for your finances, and how to overcome it.

What Is Ego Depletion?

The concept of ego depletion hinges on the idea that our willpower reserves are finite, and when we exert self-control for too long, we use up those reserves. Once those are depleted, it is harder to exert self-control, and we’re more likely to make poor decisions.

The term was coined by American social psychologist Roy Baumeister in the late 1990s, though the idea of ego depletion has become popular in recent years. This may be in part because it makes sense intuitively. For example, the experience of eating a healthy breakfast and lunch only to get home from work and eat a bag of chips for dinner is pretty easy to relate to.

However, not everyone agrees with the concept of ego depletion. Some scientists report a lack of consistent data to support the idea. Instead, they have found that motivation is not finite. Rather, it can be subjective, and there are ways to increase it. That can be a good thing as you begin to set long-term financial goals.

If you’re looking to build your long-term financial plan, a money tracker app can help. The SoFi app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring. Plus, you can get other valuable financial insights.

Causes of Ego Depletion

There are a variety of factors that may play a role in ego depletion.

•   Low blood sugar. If you haven’t eaten and your blood sugar has dropped, it may be more difficult to exert willpower.

•   Emotional distress. Temptations may be harder to resist if you’re experiencing a state of mental anguish.

•   Unfamiliar tasks. If you are doing something for the first time, you may need to exert more mental energy, which can lead to ego depletion.

•   Lack of choice. If you are forced to do a task not of your choosing, you may be more likely to become depleted.

•   Illusory fatigue. If you think that a task will be mentally tiring, you may experience ego depletion faster. In other words, ego depletion happens more often when you expect it to. If you think a task won’t tax you too much, you may be able to exert more self-control.

•   Cognitive dissonance. Situations in which you do or say something that contradicts your beliefs can tire you out and diminish your self-control.

•   Variable heart rate. Those who experience variable heart rate have been found to have less self-control.

The Effect of Ego Depletion on Your Finances

If tasks that require self-control weaken your willpower, you may be less likely to make good decisions when you experience ego fatigue. When it comes to your finances, for instance, you may be more likely to spend money on things that you can’t afford.

Ego depletion could also mean you’re less equipped to make important decisions, such as how to invest your money. For example, if the market is experiencing a downturn, you may find yourself more prone to panicking and potentially pulling out your money. But in doing so, you’ll lock in losses and potentially miss out on a subsequent upswing.

Ego depletion could also mean you miss important deadlines, such as deadlines for funding your 401(k) or IRAs, or tax deadlines.

Recommended: Personal Finance Basics for Beginners

How to Overcome Ego Depletion

Luckily, there are ways to overcome ego depletion and improve your money mindset.

Get Enough Sleep

Lack of sleep makes self-control difficult. Sleep counteracts fatigue and helps reset your willpower reserves, so practice good sleep hygiene. Go to bed at a consistent time. Make sure your bedroom is quiet, relaxing, and dark. Avoid large meals, caffeine, and alcohol before bed.

Manage Stress

Managing stress can help you address the causes of ego depletion as well as its effects. Consider strategies such as deep breathing, mindfulness exercises, eating healthy, and consistent exercise.

Set Goals

Clear financial objectives and the steps you need to reach them can help overcome ego depletion. Consider using SMART goals, or goals that are specific, measurable, achievable, relevant, and time-bound. With these in place, you’ll know what you need to do to accomplish your objectives, and you’ll also be less likely to make moves that stray from your plan.

Plan for the Long Term

Long-term financial plans take your goals, risk tolerance and time horizon into consideration. They are built to account for the natural cycles of volatility. With a long-term plan to refer to, you may be less likely to make rash decisions in the short term, such as panic selling when markets are down or buying when market prices are peaking and may be nearing a fall.

Recommended: Guide to Money Affirmations

Tools to Help Your Reach Your Goals

There are a variety of tools out there that can help you set and meet your goals and make financial freedom a reality. It’s worth shopping around to find the ones that work best for you and you’re more likely to stick with.

One to consider: a spending app, which can help you set up a budget, categorize and track spending, make bill payments on time, and track your credit score.

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The Takeaway

The idea of ego depletion centers around the idea that when we exert self-control for too long, we use up our willpower reserves and are more likely to make poor decisions. Learning the causes of ego depletion is a first step in helping you head off rash financial decisions that may work against you. If you recognize that your willpower is fading, take a breather. And when in doubt, refer back to your long-term financial goals and plan.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What is the cause of ego depletion?

Ego depletion can be caused by a number of factors, such as emotional distress, fatigue, low blood sugar, or unfamiliar tasks.

What is an example of ego depletion?

An example of ego depletion might be spending the day hard at work and then coming home, sitting on the couch, and turning on the television instead of pursuing other healthier activities, such as going to the gym.

How do you deal with ego depletion?

There are a number of strategies to combat ego depletion, such as getting enough rest, managing stress, and setting and sticking to long-term goals.


Photo credit: iStock/Delmaine Donson

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Benefits of Working From Home for Employees

Benefits of Working From Home for Employees

Since 2020, work-from-home opportunities have become easier to find. While it can take some adjustments on both sides, working from home has significant benefits for employees and employers.

Read on to learn some of the advantages of work-from-home roles, as well as how to find these jobs.

Key Points

•   Remote work typically gives employees the flexibility to manage their schedules and personal tasks more effectively.

•   Eliminating the daily commute saves employees both time and money, contributing to higher job satisfaction.

•   Reduced social interruptions in a home office setting can lead to greater focus and productivity.

•   With a less formal dress code, employees feel more relaxed, so the work experience seems more comfortable and enjoyable.

•   Working from home can improve employees’ work-life balance, helping them achieve stability and contentment.

What Are the Benefits of Remote Work for Employees?

While no two jobs are exactly alike, you can generally expect these benefits in working from home.

•   Workday flexibility. Depending on company policy, you may be less tied to your desk while working from home during the day. That could give employees the time to attend to housekeeping chores or to take a walk between meetings and tasks. Similarly, employees may be able to start their workday earlier or later based on preference.

•   No commute. With no commute to or from the office, employees who work from home free up time during the day. They may also save money on public transport or gas and car maintenance.

•   Fewer interruptions. With no water cooler to gather around or coworkers to people-watch, working from home often has fewer social interruptions than a traditional office setting.

•   Less formality. The work-from-home dress code is usually less formal than the office. Not only are employees more comfortable during the day, they can save on wardrobe costs.

•   Location. Many work-from-home employees have the luxury of choosing where they work geographically — though they may still be required to work hours that align with their employer’s time zone.

Compared with a traditional office job, working from home can take some getting used to, but many employees feel that it’s worth it.

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Recommended: Free Credit Score Monitoring

Examples of Remote Work Benefits for Employees

The benefits of working from home for employees are far ranging and vary by role and company. The examples below help explain why remote work is appealing to many office workers.

Saving Money

People who work from home save money on things like lunches out and an office wardrobe. Employees who can prepare meals in their own kitchen are less likely to rely on takeout. Similarly, employees save money without a commute, whether that means reduced trips to the gas station or fewer public transit passes.

Setting up a home office can involve new expenses, but if workers are smart about managing their work-from-home budget, they usually come out ahead.

A spending app can quickly show you how much money you’d save by working from home.

Recommended: Does Net Worth Include Home Equity?

Saving Time

Office distractions can challenge productivity. Working from home can have its share of distractions as well — including chores, children, and pets. (Some parents with flexible work-from-home jobs may long for their relatively peaceful days in the office.) But for the most part, employees tend to be more productive when they work from home.

At home, you’re unlikely to fall into conversations on a journey from your desk to the bathroom, and less likely to be interrupted when you’re focused on a task.

Recommended: Best Self-Employed Jobs for Parents

Saving Sanity

While stress can be harder to quantify, employees who work from home may feel less frazzled during the workday. This can be attributed to everything from setting up an optimal home office to avoiding a stressful commute.

Reducing workplace stressors can benefit productivity, job satisfaction, and employee engagement.

Recommended: 31 Part-Time Remote Jobs with Flexible Hours

What Are the Benefits of Remote Work for Employers?

At first glance, it may feel like remote work is largely more beneficial to the employee than the employer. However, that’s not necessarily the case. The employer benefits are motivating many companies to prepare for a more remote workforce.

•   Lower operational costs. Employers save money when they’re not leasing and maintaining an office space. They may also be able to save on things like office equipment and employee benefits.

•   Flexible budgets. When a company can hire from anywhere across the country or globe, it may be able to acquire talent at a more affordable rate.

•   Higher productivity. Productive employees lead to a better bottom line for employers.

•   Less absenteeism. When everyone is working remotely, there’s less likelihood of an office bug that sends half the employees home, reducing sick days.

•   Higher retention. Employees who are happy with the remote office policies are more likely to stay with the company. Improved retention rates can save a company significant resources over the long run.

Recommended: Should I Sell My House Now or Wait?

Examples of Remote Work Benefits for Employers

Employees have more autonomy in a remote culture, but worker satisfaction ultimately benefits employers as well.

Better for the Bottom Line

When a team is fully remote, a company saves money and resources on office space, utilities, maintenance, furniture, and benefits like catered lunches and new equipment.

Remote work also frees office managers and similar roles to focus on things like company culture and worker satisfaction instead of sourcing new carpets and real estate.

Better for the Talent Pool

When geography isn’t an issue, employers can access a much wider talent pool. If a company seeks highly specific roles or qualifications, a national or even international search can yield much better applicants than one limited to a single area.

Remote work can broaden the talent pool in another way. Many qualified candidates cannot spend long hours in an office on a regular basis, either because they have a physical disability or they care for a child or aging parent who needs supervision. Also, retirees who want to bring in some additional income may feel more comfortable in a work-from-home job.

Better for Boosting Satisfaction

Satisfaction may be less noticeable than savings on rent or getting better applicants for an open job. Still, when employees are happy in their roles, it generally leads to less turnover, higher productivity, and a more positive work environment.

When teams are engaged and happy, they’ll do better work, saving the company time and money. Plus, less time is wasted on hiring and training new employees, so employers can focus on growth and building a stronger company culture.

How to Find Remote Job Opportunities

If the benefits of remote work make it sound like a good fit for you, here are some ways to “try before you buy.”

•   Consider getting a second job you can do at home after hours.

•   Negotiate with your current company to work from home one day a week for a set period — for instance, Fridays during the summer.

•   Reach out to friends who work from home for their take on what it’s really like (and maybe a referral!).

•   Not all work-from-home jobs are tied to a corporate office. Start your own business inspired by your skills and passions.

The Takeaway

With remote work becoming more common, it’s worth learning about the benefits for employers and employees. Working from home can reduce stress, boost productivity, and even save employees money. For employers, remote work can help their bottom line by reducing office costs and increasing employee retention.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What are the benefits of working from home for employees?

Most of the benefits of working from home for employees have to do with autonomy. Work-from-home employees get to choose where they work, how they work, when they work, and even their dress code.

What are five advantages of working from home?

Five advantages of working from home include workday flexibility, saving time and money, higher productivity, location flexibility, and setting your own hours.

What is the biggest advantage of working from home?

For most employees, the two biggest advantages of working from home are saving time and money. Employees save time by not commuting to and from work or chatting with coworkers. Similarly, they’ll probably save money in the long run by avoiding lunches out and spending less on workplace attire.


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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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How the Average Cost Per Year of Raising a Child Has Changed Since the Early 2000s

Having children can be rewarding, but thanks to higher rates of inflation, it’s also getting more expensive. Today, parents can expect to spend around $23,000 per year, or $414,000 through age 18, according to recent research.

If you’re considering growing your family, understanding all the costs involved can help you prepare financially. Here’s a closer look at the average annual cost of raising a child in the U.S. and how that figure has changed over the past two decades.

Key Points

•   The annual cost to raise a child in 2025 is projected to be around $23,000.

•   The total cost of raising a child to age 18 is expected to reach $414,000.

•   Housing, food, and child care and education are the largest expenses.

•   Inflation has significantly increased the cost of raising a child since 2000.

•   Effective budgeting and tracking spending can help manage these rising expenses.

What Is the Cost of Raising a Child in the US in 2025?

According to recent research, the cost of raising a child can cost $23,000 per year as of 2024, which would equal $414,000 through age 18. That doesn’t include adjusting for inflation, nor does it include how much it costs to attend college.

Of course, the amount you end up spending depends on a number of factors, including household income, the cost of childcare, and the cost of living in your area.

If you want more personalized insights to help you plan your spending, consider using an online calculator.

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A Comparison of the Cost of Raising in Child in 2000 vs 2025

The average cost of raising a child in 2000 looked much different than it does now, thanks in large part to the recent surge in inflation rates.

In 2000, a typical middle-income family could expect to spend $165,630 to raise a child to the age of 17, according to an analysis of USDA (U.S. Department of Agriculture) data by the Brookings Institution. For a child born in 2015, the USDA forecast that the cost would be $233,610. In 2025, that same family would spend $414,000 to raise a child through age 18, which is considerably more. Note that this amount doesn’t include extras like summer camp or birthday parties, nor does it factor in the cost of college.

Recommended: Average Salary in the U.S.

Top Expenses of Raising a Child in 2025

When it comes to the average cost of raising a child from birth through 18, families can expect to spend around $23,000 per year. The following table shows where that typically money goes.

Cost category

Average percent (%) of spending

Housing 29%
Food 18%
Child care and Education 16%
Transportation 15%
Healthcare 9%
Miscellaneous 7%
Clothing 6%

Source: USDA’s Expenditures on Children by Families, 2015

Top Expenses of Raising a Child in 2000

Average middle-income parents in 2000 spent around $9,201 per year on child-rearing costs. As the chart below shows, housing and food were the biggest expenses. But compared to 2025, parents spent less on other things, like healthcare and child care and education.

Cost category

Average percent (%) of spending

Housing 33%
Food 18%
Transportation 15%
Miscellaneous 11%
Child care and Education 10%
Healthcare 7%
Clothing 6%

Source: USDA Expenditures on Children by Families, 2000

How to Reduce the Cost of Raising a Child Today

No matter when you become a parent, you’ll likely have some major expenses. The good news is, it is possible to save money while raising kids. Here are some tips to consider:

•   Look for ways to lower housing expenses. Housing costs are the number-one expense for families, so finding ways to trim expenses there can really help you save. For instance, if you’re planning to move, you may want to expand your search to include smaller, less expensive homes located in neighborhoods with lower property taxes.

•   Purchase secondhand clothes. Kids tend to outgrow their clothing quickly. Rather than spend a lot on new outfits, shop secondhand whenever possible. Tag sales, thrift stores, and consignment sites are all good places to explore.

•   Make the most of your local library. Are expensive streaming subscriptions eating away at the family budget? Consider canceling some of those streamers and heading on over the local library. Not only can you check out books and audiobooks for free, you can also rent DVDs and enjoy free events.

•   Shop generic. When it comes to basics like diapers, toiletries, and household cleaners, skip the fancy brand names and go for less-expensive generic versions. Purchasing from wholesale clubs may also stretch your budget.

Recommended: How to Create a Household Budget

More Financial Tips for Parents

Whether you’re looking to start a family or add to your brood, there are also some smart financial habits you can start today that can make it easier to afford raising children. As a bonus, these habits can also help you teach your child about money management.

•   Pay down debt quickly. When a borrower takes on debt, they repay not only the amount they borrowed, they also owe interest and fees to the lender in exchange for borrowing the money. That’s why it’s so important to pay off debt quickly. The sooner you erase your debt, the less interest you’ll have to pay.

•   Create a budget that grows with your family. Coming up with a budget — and adapting it to meet your current needs — can help your finances roll with whatever changes life has in store. It’s a good idea to sit down once a month to evaluate what’s working in the budget, what can be improved, and what new expenses are on the horizon. A spending app can also help you keep tabs on where your money is going.

•   Prioritize savings. When you’re raising a family, it’s easy to let long-term savings goals fall by the wayside. One way to make saving second nature is to sock away a portion of each paycheck into a savings account or investment account. By paying yourself first, you’re better positioned to reach your financial goals, whether that’s putting multiple children through college, investing, or saving for retirement.

Recommended: Creating an Investment Plan for Your Child

The Takeaway

Having a family can be rewarding — and expensive. The average family in 2024 paid around $23,000 per year to raise a child. Housing, food, and child care/education are among the top three biggest expenses. The good news is, there are ways to manage expenses and still save for long-term financial goals. Budgeting well and tracking spending and saving are key steps.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

How much does it cost each year to have a child?

The average family spent around $23,000 per year to raise a child in 2024.

How much does it cost to raise a child to 18 in 2025?

According to 2024 data, a family will spend $414,000 to raise a child through the age of 18.

How much does a baby cost on average?

The average family can expect to spend around $23,000 a year to raise a child, according to 2024 data. Costs for a baby could be less, since there aren’t, say, educational expenses yet or hobbies to pay for. But there could be the costs of setting up a nursery and childcare.


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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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What Is a Six Figure Salary?

What Is a Six-Figure Salary?

When setting income goals, some people use a six-figure salary as a benchmark, which runs from $100,000 and $999,999 per year. Here, learn more about what this salary means, how to earn that level of income, and more important intel.

Key Points

•   A six-figure salary refers to an annual income of at least $100,000.

•   It is often associated with higher-paying professions and can provide financial stability and opportunities.

•   Earning a six-figure salary requires education, skills, experience, and sometimes additional certifications or advanced degrees.

•   Factors such as location, industry, and job demand can impact the availability of six-figure salary opportunities.

•   It is important to consider the cost of living, taxes, and personal financial goals when evaluating the benefits of a six-figure salary.

How Much Is a Six-Figure Salary?

“Six figures” simply refers to a number with six digits. Typically used with money, the term covers amounts from $100,000 to $999,999. (Once you hit 1 million, you’re in seven-figure territory.) Someone with a six-figure salary makes at least $100K.

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How to Make Six Figures

There is no one right way to earn six figures. That said, there are strategies that can better position you for this level of income. Getting a good education, while not absolutely necessary, is a solid foundation for the kinds of jobs that pay in the six-figure range. Another path is to start your own business.

The Bureau of Labor Statistics (BLS) lists 170 occupations with typical annual salaries of at least $100,000. The degrees required for these jobs range from a high school diploma to a doctoral degree.

It’s important to recognize that certain careers just pay more than others. Once you’ve chosen a high paying field, you can determine the type of education and training you’ll need to pursue.

You’ll also want to learn how to manage and grow your money. A good place to start is by tracking your expenses and savings with a free spending app.

Average Age to Make Six Figures in the US

According to the U.S Census Bureau’s most recent data, about 22% of households earn between $100,000 and $149,000. Another 11.5% earn between $150,000 and $199,000. And 13% earn $200,000 or more. Note that this is household income, not individual. Compare those figures to the national average salary of $66,622.

Some workers begin earning six figures in their twenties and thirties. Economists nickname them HENRYs, for “high earners, not rich yet.” But for most people, their “peak earning years” are from age 35 to 64.

Keep in mind that annual income says nothing about someone’s financial health. An individual making $50K who manages their money well can be in a better place financially than someone making six figures.

Recommended: What Is a Good Entry-Level Salary?

Examples of Jobs That Pay Six Figures

A look at the highest paying jobs by state offers insight into these types of careers. All these jobs make at least $200,000, and all but one are in the medical field. Texas is an outlier. There, chief executives, the highest paying job in the Lone Star State, earn $239,060 on average.

Other types of jobs that can pay a six-figure salary include airline pilots ($219,140), IT managers ($169,510), and lawyers ($145,760). It’s probably fair to say that, in any industry, there are successful bosses who make six figures.

What Does a Six-Figure Salary Get You?

What a six-figure salary will get you depends on several other factors. A big one is the cost of living in your area. This is how much you spend on housing, transportation, food, and other necessities. When someone lives in a place with a high cost of living, they will typically have less disposable income and less to put into savings than someone who lives in a low cost-of-living location. This can be true even if both are making competitive salaries.

Another factor is household size. For a single person living in California, a six figure salary might be more than enough. However, a family of four living in the same area could be just scraping by.

Recommended: How to Counter a Salary Offer

Do You Need a Six-Figure Salary to Build Wealth?

While a six-figure salary may be considered good, you don’t necessarily need to earn that much to build wealth.

That said, you need to have a reasonable income to live on. For example, a $20,000 salary typically isn’t enough for a household to meet basic expenses. Consider rent: The 30% rule recommends spending no more than $6,000 on rent per year (that’s 30% of $20K), which works out to $500 a month. The average rent nationwide is now $1,750, more than three times what you could afford on a $20,000 salary.

What about a $40,000 salary? This may be enough for a single person in some areas, but probably not for a family. And while an individual could afford basic necessities, they may not have much left for building wealth — that is, saving and investing.

Another factor is existing debt. If you are paying down high-interest credit card balances, it can be hard to also put money toward savings.

The income needed to build wealth then is an amount that covers the cost of living in your location, allows you to pay off any debt, and provides enough extra to set aside money for an emergency fund, retirement, and investing.

How to Build Wealth Without Earning a Six Figure Salary

As we mentioned above, the steps to building wealth are the same for any salary. First, pay off your debt, especially high-interest credit cards and loans. Money going to interest is money that could be going into your savings or investments.

Second, look for ways to cut back on spending: cooking at home instead of going to costly restaurants, closing fee-based apps that you don’t really need, and so on.

Finally, save and invest the money that isn’t going to credit card debt or other nice-to-have but not necessary expenses.

Recommended: The 52 Week Savings Challenge

The Takeaway

A six-figure salary, meaning one between $100,000 and $999,999, is a benchmark for many people who want to meet financial goals. Having a good education is usually helpful but not always necessary, and certain jobs are more likely to come with six-figure salaries. Having a good salary is helpful when building wealth, but the same strategies can be utilized on a five-figure salary. Tracking your spending and automating your savings are two good first steps.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Is a six-figure salary good?

In most places in the United States, $100,000 is a good salary, covering the needs of an individual or small family, while building savings.

What does a six-figure salary mean?

This is a salary that contains six digits: from $100,000 to $999,999.

What is an-eight figure salary?

This is a salary amount consisting of eight digits: from $10 million annually to $99 million.


Photo credit: iStock/Renata Angerami

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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