The States Most (and Least) Prepared for Retirement

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The 10 States Least Prepared for Retirement

10. Colorado
> 401(k) balance to annual income: 42.6%
> Median balance: $23,583 (23rd lowest)
> 401(k) growth 2008-2011: 29.4% (18th highest)
> Debt to income: 744% (13th highest)
> Average total debt: $221,648 (10th highest)

Despite a median household income of $55,387, almost $5,000 above the national median income, residents of Colorado were especially poor savers. In 2011, the median balance of a resident’s 401(k) plans was just $23,583, worse than half the states in the country. One reason was Colorado residents’ high debt load of $221,648 on average in consumer debt, the 10th highest in the nation. Worse, the average resident of Colorado owed $6,176 in credit card debt — more than almost all states in the nation. Such debt usually carries especially high interest rates. The low 401(k) balance also may have been the result of many residents opting for the state’s 529 plan, which in Colorado matches lower- and middle-income residents’ college savings dollar-for-dollar up to $500.

9. California
> 401(k) balance to annual income: 42.3%
> Median balance: $24,254 (23rd highest)
> 401(k) growth 2008-2011: 30.5% (15th highest)
> Debt to income: 1,164% (2nd highest)
> Average total debt: $324,346 (2nd highest)

California residents had a relatively low 401(k) balance despite the fact that they had a median household income of $57,287 — 10th highest among all states — and the fact that their 401(k) balances grew by 30.5% between 2008 and 2011, among the top-third growth rates. Going against Californians, however, was their high level of debt — the second highest of all states in terms of both average household and as a proportion to income. The average mortgage debt in California was $302,850, the second highest of all states. California’s unemployment rate of 10.2% as of September 2012 was also the third-highest rate in the country and 2.4 percentage points above the national rate.

Also Read: America’s Richest Cities

8. Texas
> 401(k) balance to annual income: 41.9%
> Median balance: $20,715 (12th lowest)
> 401(k) growth 2008-2011: 20.8% (21st lowest)
> Debt to income: 632% (22nd lowest)
> Average total debt: $156,030 (20th lowest)

Texas residents had a median 401(k) balance of just $20,715 in 2011, although this was an improvement from a recent low of $12,563 in 2009. Despite this growth, in addition to one of the lowest costs of living in the nation and an unemployment rate one percentage point below the national rate, Texans remained poor savers. The problem did not have much to do with debt, as the average resident carried just over $156,000 in debt as of September — among the nation’s lower amounts. Income is also not likely a factor, although median household income was $49,392 in 2011 — just slightly more than $1,000 below the U.S. median. And there is no individual income tax in Texas.

7. New Mexico
> 401(k) balance to annual income: 41.8%
> Median balance: $17,557 (5th lowest)
> 401(k) growth 2008-2011: 10.0% (4th lowest)
> Debt to income: 780% (9th highest)
> Average total debt: $178,031 (24th highest)

Between 2008 and 2011, median 401(k) balances in New Mexico grew by just 10%, the fourth lowest in the country. While the median balance of $17,556 in 2011 was up from $14,888 in 2010 and $12,244 in 2009, the balance in 2011 was ranked fifth worst among all states, down from eighth worst in 2010 and 12th worst in 2009. New Mexicans had 780% more debt compared to their per capita income in 2011, the ninth-highest rate in the country. Although the median income in New Mexico was more than $8,500 less than the national median in 2011, the average credit card debt was $5,757, the 13th highest in the country.

6. Kansas
> 401(k) balance to annual income: 40.4%
> Median balance: $19,779 (9th lowest)
> 401(k) growth 2008-2011: 17.8% (16th lowest)
> Debt to income: 533% (3rd lowest)
> Average total debt: $135,704 (8th lowest)

Residents of Kansas were less likely to be burdened by debt than the residents of most other states. In 2011, the average resident had just $135,704 of consumer debt, one of the lowest totals in the nation, with the average mortgage debt of $114,093 also among the country’s lowest. Still, Kansas was just one of nine states with a median 401(k) balance of less than $20,000. One problem was that the median balance grew by just 17.8% since 2008, among the bottom third of growth rates in the country. Now may be a good time for residents to start placing savings in a 401(k). According to the Wichita Eagle, the state’s 529 college savings plan was just one of four such plans, out of 64, to receive a negative rating from Morningstar, which considered return on investment, fees and expenses, as well as the fund’s holdings.