We get this question almost every week: Everyone I know is moving to The Villages. Am I missing something by looking somewhere else? Usually not. The Villages works for many people, but the sticker price hides recurring costs, and Florida’s numbers have grown less friendly than the brochure suggests. A growing group of retirees is heading to Sioux Falls, South Dakota instead. Here’s what it takes to make that work.
Why Sioux Falls Keeps Showing Up on the Short List
South Dakota’s cost of living index sits at 88.586, well under Florida’s 103.414. South Dakota ranks 2nd on the 2025 State Tax Competitiveness Index and carries the country’s second lowest income-adjusted tax burden at $5,041 per capita. There is no state income tax, no tax on Social Security, no tax on pension or IRA withdrawals, and no estate tax. Sioux Falls offers two major hospital systems, a regional airport, and housing stock untouched by hurricane insurance repricing.
The Villages sticker price tells only part of the story. Buyers absorb CDD bond assessments, monthly amenity fees, and Florida homeowners insurance that has roughly doubled over the past several years. Those recurring costs rarely appear in listings.
What It Actually Costs In Sioux Falls
A realistic working budget for a couple retiring at 62 in a paid-off three-bedroom home in Sioux Falls, in current dollars:
- Property taxes, homeowners insurance, and maintenance on a home around the mid-$300s: $8,500
- Utilities, with real Dakota winter heating: $3,800
- Food, using the USDA moderate-cost plan for two: $13,200
- ACA marketplace premiums for two, pre-Medicare, MAGI managed into the subsidy zone: $9,600
- Two vehicles, fuel, insurance, replacement reserve: $8,500
- Travel, hobbies, gifts, personal: $9,000
- Miscellaneous reserves (roof, HVAC, medical out-of-pocket): $6,500
- Federal income tax on withdrawals: $4,500
That totals roughly $63,600 a year. Once both spouses reach 65 and shift to Medicare, the ACA line drops and Part B plus a Medigap plan replaces it, generally at lower total cost. Note that the 2026 Medicare Part A inpatient deductible is $1,736, and IRMAA does not kick in on Part D until modified AGI exceeds $109,000 single or $218,000 joint, which most retirees drawing from a balanced portfolio never touch.
The Portfolio Math
Assume both spouses claim Social Security at full retirement age of 67 and land near the recent average household benefit of roughly $46,000 combined. From age 67 forward, the gap between $63,600 in spending and $46,000 in Social Security is about $17,600 a year. Using a 4% withdrawal rate on that gap gives a portfolio target of about $440,000 at age 67.
The harder part is the bridge from 62 to 67. Five years of full expenses with no Social Security means roughly $320,000 in cumulative spending. Set aside $400,000 in a taxable brokerage or short treasury ladder to cover that window while managing MAGI for ACA subsidies. Total portfolio at retirement: around $840,000. Call it $900,000 to give yourself margin for a bad sequence of returns and the 2.8% 2026 COLA not always keeping pace with what your grocery bill actually does. CPI has climbed from 322.169 in July 2025 to 332.568 in June 2026, and retiree budgets feel that more than the headline suggests.
The Thing Most Analyses Miss
South Dakota’s tax structure interacts with the ACA bridge in a way Florida’s does too, but without the insurance drag. In a no-income-tax state you can run aggressive Roth conversions during the 62-to-65 window only up to the ACA subsidy cliff, then throttle back. In Florida, the same play is available, but every dollar saved on the federal side goes to a homeowners insurance carrier and, if you bought in The Villages, to a bond amortization schedule that runs for decades. Over a 30-year retirement, insurance and assessment inflation in coastal Florida can easily consume six figures that a Sioux Falls buyer keeps.
The Case-Shiller National Home Price Index sits at 332.7, a fresh high, so you are not buying cheap anywhere. But existing home sales at 4.09 million annualized put buyers in a softer market than the past few years, and negotiating room in Sioux Falls is genuinely better than in a saturated Villages resale.
The Number You Need
To retire at 62 in Sioux Falls with a spouse, a paid-off home, and a spending plan around $63,600 a year, plan on roughly $900,000 invested, a blended withdrawal rate near 4%, Social Security claimed at 67, and an ACA bridge funded from taxable accounts with MAGI managed deliberately. If you are single, cut the Social Security assumption in half and target closer to $1.1 million. Smart retirees keep landing here because the recurring cost stack behaves, the tax code stays out of your way, and the dollars you do not spend on insurance and assessments are the same dollars that let a mid-six-figure portfolio actually last 30 years.
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