Retiring in New Jersey at 65: What’s Your "Magic Number"?

The Snapshot: Estimated Savings Targets

New Jersey is generally more expensive than its neighbor Pennsylvania. Based on 2025 cost-of-living data, here are the estimated savings benchmarks for a 25-year retirement (age 65 to 90). These estimates assume you have a paid-off mortgage or stable rent, receive average Social Security benefits, and withdraw 4% of your portfolio annually.

• Essential / Modest Lifestyle: If you are watching every penny and perhaps benefiting from property tax relief programs, you will likely need an annual income between $55,000 and $65,000. To sustain this, your recommended nest egg is $825,000 to $950,000.

  
  
  

• Comfortable Lifestyle: For a lifestyle that includes dining out, shore trips, and occasional travel, you will likely need an annual income between $80,000 and $100,000. To sustain this, your recommended nest egg is $1.3 Million to $1.6 Million.

• Luxurious Lifestyle: If you plan on maintaining a large home in Bergen or Morris counties or frequently traveling internationally, you will need an annual income of $130,000+. To sustain this, your recommended nest egg starts at $2 Million+.

  
  
  

1. The "Jersey Paradox": High Costs vs. Tax Breaks

New Jersey is famous for high costs, but it tries to balance the scales for seniors with aggressive tax breaks.

• The "3-Year Rule" & Pension Exclusion: This is the game-changer. For 2025, if your total gross income is $150,000 or less, you can exclude up to $100,000 (Single filers) or $150,000 (Married/Joint filers) of retirement income from state taxes. This covers pensions, 401(k) withdrawals, and IRAs.
• 0% Tax on Social Security: Like PA, New Jersey does not tax your Social Security benefits.
• The Property Tax Hurdle: The trade-off is property tax. New Jersey has the highest average property tax rate in the nation (~2.23%). On a median home, you might be paying $9,000 to $12,000+ annually just in taxes.

Key Takeaway: You can earn a significant amount of retirement income in NJ tax-free, but you must budget heavily for property taxes. The "ANCHOR" relief program is vital here; it provided up to $1,750 for eligible senior homeowners in recent years.

2. Cost of Living Breakdown

To calculate your exact number, you must account for NJ's premium pricing on housing and services.

Housing (The Wealth Eroder)

• North Jersey (NYC Commuter Belt): Counties like Bergen, Essex, and Hudson are significantly more expensive. If retiring here, add 20–30% to your required nest egg.
• South Jersey: Areas like Camden, Gloucester, and parts of the Shore (excluding luxury beachfronts) offer much lower home prices, often comparable to PA.
• Exit Tax: If you sell your NJ home to move elsewhere, be aware of the "Exit Tax" (technically a prepayment of estimated tax), which can disrupt your cash flow at closing, though it is not an extra tax if you don't owe capital gains.

Healthcare

Healthcare costs in NJ are higher than the national average.

• Expect to pay: ~$7,500–$10,000 per person/year.
• A 65-year-old couple should budget roughly $330,000 (cumulative) for out-of-pocket medical expenses throughout retirement.

Utilities & Commuting

Even if you aren't working, "commuting" costs (tolls, gas, insurance) in NJ remain high. Car insurance rates in NJ are consistently among the most expensive in the country. Ensure your budget accounts for $1,500–$2,000+ per year just for auto insurance per vehicle.

3. The Social Security Offset

New Jersey residents often receive higher-than-average Social Security checks due to higher historic earnings in the region.

• Average Annual Benefit (per person): ~$26,000 (roughly $2,190/month)
• Average Household Benefit (Couple): ~$52,000

The Math: If you need $90,000 annually for a comfortable lifestyle and receive $52,000 from Social Security, your savings only need to generate the remaining $38,000. Using the "4% Rule," you would need a portfolio of $950,000.

4. Risks to Watch Out For

• Inheritance Tax: NJ abolished its Estate Tax in 2018, but it still has an Inheritance Tax.

  • Class A (Spouse, Children, Grandchildren): 100% Exempt. No tax.

  • Class C (Siblings, Son-in-law/Daughter-in-law): Taxed at 11%–16% on amounts over $25,000.

  • Class D (Nieces, Nephews, Friends): Taxed at 15%–16%.

  • Warning: If you plan to leave money to siblings or friends, they will lose a chunk to the state.

• Long-Term Care: Costs are steep. A private room in a nursing home in NJ averages over $150,000 per year, significantly higher than in PA.

Summary Checklist for Age 65

If you are retiring in New Jersey, use this checklist to secure your finances:

1. Apply for ANCHOR: Ensure you file for the ANCHOR property tax relief program every year you are eligible.
2. Review the $150k Cliff: The income tax exclusion is huge, but it has a cliff. If you earn $150,001, you might lose the exclusion benefit. Consult a tax pro to manage your withdrawals so you stay under the limit.
3. Check Beneficiary Classes: If your beneficiaries are not your spouse or children, consider life insurance (which is exempt) to cover the Inheritance Tax bill.
4. Gap Calculation: (Total Annual Budget + Property Taxes) minus (Social Security + Pensions) = Income Gap.
5. The Final Number: Multiply your Income Gap by 25.