In order for Americans to enjoy a financially comfortable retirement, a rule of thumb from financial advisors is that they will need about 70% of their pre-retirement income in order to have comfortable life. Residents of just three states meet that target, and in the United States as whole the ratio is just over 60%.
Using data from the Census Bureau’s American Community Survey, Bankrate divided the median annual household income for those who are 65 and older by the median annual household income for those in their later working years, between ages 45 and 64.
The three states where residents meet or exceed the 70% ratio are Hawaii (72.6%), Alaska (71.1%) and South Carolina (70.2%). The states where the income ratio is lowest are Massachusetts (48.2%), North Dakota (49%) and New Jersey (52%).
Bankrate cites the chief investment officer at a South Carolina financial services firm:
Americans are facing a shortfall of retirement income (because) their saved assets are not enough to fund their desired or even current lifestyle.
In the three states where retirement income ratios are highest, each state has a few unique factors contributing to retirement income. In Alaska, for example, the public employees pension system pays a 10% annual bonus to retired state employees who remain in Alaska. In addition, each resident receives an annual payment from the state fund that accumulates oil and gas royalty payments. In 2015 that amounted to $2,072, the largest dividend ever.
Hawaii also has a high percentage of government workers who also receive defined benefit pension payments. The state’s unionization rate is 20%, nearly double the U.S. average of 11%. These retirees also benefit from a defined benefit plan.
In South Carolina the state’s once-thriving manufacturing businesses may still be making pension payments to some retirees. The state is also home to eight military bases and military retirees, again with defined benefit plans, may be staying there.
For those of us who don’t live in one of these three states, we just need to save more.
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