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Being a top earner is relative: Why trading a high-tax zip code for a low-cost state is the ultimate retirement power move.
By
Adam Shell
published
27 February 2026
in Features
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Being in the top 1% of earners doesn't necessarily mean you're rich or that your odds of a secure retirement are 100%. That's especially true if you live in California or Washington, D.C., where pricey real estate and a high cost of living can take a big bite out of your budget.
It's not just what you earn, but where you live, that determines whether you're truly rich or just doing okay. In fact, being "rich" in the United States is shaped as much by geography as it is income, according to a BestBrokers analysis that quantifies the income needed to join the elite 1% club in each state.
Where you live in your peak earning years and where you live in retirement impacts retirement readiness.
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Sign upIncome vs location
"Famously originating in real estate, the mantra ‘location, location, location’ is also valid in wealth and personal finance," said Paul Hoffman, an analyst at data firm BestBrokers. "Where you live can add or shave hundreds of thousands of dollars off what it takes to be in the top 1%."
At the national level, Americans need an annual income of at least $742,957 to break into the 1% club, according to BestBrokers. In 2026, more than 1.5 million U.S. households earn enough to be among the richest 1% of Americans.
Income thresholds to make the cut, however, differ by state. It takes a minimum income of $1.09 million, for example, to be among the top 1% earners in Washington, D.C. (See the income needed be a 1% earner in each state in the table below.) You’ll need annual earnings of $1.07 million in Connecticut and $980,298 in Massachusetts.
On the other hand, an annual income of $500,000 or less is enough to break into the top 1% in West Virginia, Mississippi, and New Mexico. In fact, the top 1% incomes in 38 states fall short of the national average.
How far a dollar goes in one state versus another often hinges on the cost of real estate. In some parts of the U.S., a salary that signals extreme affluence barely buys entry into the top tier elsewhere, says Hoffman. The cost of living also tends to be higher in states where the median home price is much higher than in cheaper areas.
Sure, it's great that one-percenters in Washington, D.C., earn nearly $1.1 million. But it costs an arm and a leg for a median-priced home — $1.25 million to be exact, compared to the national median home price of $446,000, according to Redfin data. Similarly, Californians in the 1% earn nearly $920,000 annually, but the median home price in the nation's most populous state is $818,000.
On the flip side, 1% earners in lower-cost West Virginia earn nearly $423,000 but benefit from much more affordable housing. The median home price there is $245,000.
Swipe to scroll horizontallyAnnual "1% club" income and median home price by stateState
Income to make top 1%
Median home price (December 2025)
Washington, D.C.
$1,090,935
$1,250,000
Connecticut
$1,073,564
$482,000
Massachusetts
$980,298
$652,000
California
$919,587
$818,000
New Jersey
$915,205
$561,000
New York
$905,617
$501,000
Florida
$872,852
$440,000
Washington
$831,939
$628,000
Colorado
$785,105
$633,000
Wyoming
$783,459
$441,000
Texas
$755,616
$344,000
New Hampshire
$746,900
$515,000
Illinois
$742,663
$296,000
Nevada
$714,743
$498,000
Virginia
$712,793
$469,000
N. Dakota
$706,664
$297,000
Utah
$701,372
$662,000
S. Dakota
$697,962
$325,000
Maryland
$688,163
$509,000
Minnesota
$681,932
$373,000
Georgia
$673,211
$379,000
Montana
$667,125
$515,000
Pennsylvania
$665,913
$327,000
Arizona
$651,314
$463,000
N. Carolina
$650,826
$401,000
Tennessee
$648,304
$412,000
Idaho
$637,680
$474,000
Kansas
$619,506
$293,000
Nebraska
$613,364
$293,000
Rhode Island
$612,616
$515,000
Oregon
$612,458
$511,000
Alaska
$595,571
$425,000
Vermont
$592,706
$431,000
S. Carolina
$589,701
$399,000
Delaware
$587,649
$404,000
Wisconsin
$575,594
$328,000
Michigan
$570,384
$271,000
Hawaii
$569,942
$961,000
Missouri
$567,805
$282,000
Iowa
$562,730
$241,000
Louisiana
$559,764
$254,000
Maine
$559,572
$381,000
Ohio
$559,356
$261,000
Oklahoma
$553,216
$257,000
Alabama
$540,949
$284,000
Indiana
$539,660
$270,000
Arkansas
$525,876
$269,000
Kentucky
$504,059
$278,000
New Mexico
$458,718
$364,000
Mississippi
$446,367
$267,000
West Virginia
$422,835
$245,000
Source: BestBrokers, Yahoo Finance and Redfin monthly housing market data.
For more context on state affordability, read our article on how all 50 states tax retirees.
"Expensive real estate isn't really a cost. It's ultimately a retirement fund. It's a form of forced savings." — David Schneider
The benefits of owning a pricy home
Still, there can be value in owning expensive real estate with high appreciation potential during your peak earning years, argues David Schneider, a certified financial planner and president of Schneider Wealth Strategies.
"Expensive real estate isn't really a cost," says Schneider. “It's ultimately a retirement fund. It's a form of forced savings. And with any luck, somebody who retires might be able to sell that $3 million apartment in New York City and buy a $1.5 million house in a moderate cost area. And all that extra liquidity goes toward their retirement."
How downsizing your home can upside your retirement
Trading down to a cheaper home in less-expensive parts of the nation can be a viable strategy to turn not-so-solid retirement odds into a slam dunk for retirement readiness. It's the real estate version of a winning stock trade: sell high and buy low. Selling a high-priced home in an expensive area and downsizing in a lower-cost locale can reap big dividends. The strategy allows a retiree to free up sizable home equity and cash flow, thereby improving their financial position in their golden years.
Let's say you spent most of your career living in California and sell a median priced home for $818,00. You move to New Mexico and buy a median priced home for $364,000. The numbers work on this real estate trade. You'll be able to buy your new home in cash and still have roughly $450,000 (minus real estate commissions and moving expenses) left over to pad your nest egg.
Using a home with a lot of equity built up as a retirement asset can be a win-win, especially for people who can find a new home in a different state that delivers the type of lifestyle they covet and offers good health care.
"Geography (or moving to a state with lower housing costs) is a meaningful lever to pull when it's used wisely," said Schneider. "It can turn a comfortable retirement into a wow retirement. Moving can also turn a marginal retirement situation into a truly secure one." On the flip side, if you live in a low-cost state during your major earning years, a move to a more expensive area due to a job relocation or to be closer to kids and grandkids could prove costly, Schneider adds.
Should you stay in a high-cost state, or should you go?
It's not news that most Americans feel that they're behind on their retirement savings. Even though retiring comfortably is a common goal for many workers, most people don't have confidence that they'll be able to do so. About three in five American workers (58%) say their retirement account balances are behind where they should be, according to Bankrate's 2025 Retirement Savings Survey.
From a purely financial standpoint, if you live in an expensive state, but you have ample retirement savings, and your home is paid off or your mortgage is manageable, and you can easily meet your monthly bills, retiring in place is fine.
However, the decision becomes more complicated if you live in an expensive part of the country, making it harder to fund your lifestyle as you enter retirement. The high costs of housing, taxes, and daily expenditures can take a big bite out of even a seven-figure salary.
That's where the so-called geographical arbitrage comes into play.
In lower cost states, even a much lower top-tier 1% income "can stretch significantly further, translating into large homes, lower taxes, and greater disposable income," notes Hoffman of BestBrokers. “In real terms, top 1% status can feel very different depending on the local price tag.”
One-percenters living in high-cost states, for example, could see their savings depleted more quickly and have more of their money tied up in real estate. In contrast, living in lower-cost states means retirement savings will last longer and cash flow will be higher.
No matter where a one percenter lives, the key personal finance concept to keep in mind is this: "It's not how much you make, it's how much you keep," says Daniel Milan, managing director and investment adviser at Cornerstone Financial Services.
Since the Covid crisis, Milan says more clients are weighing the financial benefits of relocating and downsizing as a retirement savings strategy. "The discussion is no longer just about weather and the snowbird phenomenon," says Milan, whose firm is based in Michigan, a state known for its harsh winters. "Nowadays, the discussion has become an analysis of the financial impact of moving to a tax-free or lower-tax state, or to a place with lower housing costs and a more affordable cost of living. The analysis is more about retirement viability, longevity, and the risk of running out of money."
Milan says a client recently came in to discuss the financial ramifications of selling their Michigan home and buying a condo in Florida. The long-term savings were substantial, Milan says. Freeing up hundreds of thousands of dollars and allocating that to their retirement account amounts to a game changer. "Over a 10 to 20-year retirement, it makes a significant difference from a stress test or risk standpoint in regards to their cash flow and retirement fund account balance," says Milan.
When it comes to a retirement nest egg, real estate equity (e.g., the difference between the market value of the home and any outstanding mortgage balance) must be factored into the equation, adds Milan.
"Even if an individual or family doesn't realize it, the appreciation of real estate plays a part in retirement viability and readiness," says Milan.
The key question to ask is: will downsizing result in a big enough cash flow benefit to make the move worthwhile.
"Can you minimize and mitigate that retirement cash flow risk and savings gap?" says Milan. "You want to really move the needle. It's about reducing risk and increasing the odds of success for a secure retirement."
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Read More
- Best Places to Retire in the US
- 5 Charming Small Towns Where America's Wealthy Retire
- Cheapest Places to Retire in the US
- 15 Cheapest Small Towns to Live In
Adam ShellContributing WriterAdam Shell is a veteran financial journalist who covers retirement, personal finance, financial markets, and Wall Street. He has written for USA Today, Investor's Business Daily and other publications.
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