For many Americans, saving for retirement represents a major financial milestone. Preparing for life after work has never been more important due to increased healthcare costs, living expenditures, and life expectancies. However, depending on variables like income levels, access to employer-sponsored retirement plans, and the cost of living in each state, people’s retirement savings might differ significantly. To assist you in determining where you stand, we’ll examine the average savings throughout the US, go into the numbers, and offer a comparison in this post.
Overview of American Retirement Savings
Although many Americans find it difficult to save enough for retirement, retirement planning is crucial to financial well-being. A 2023 Vanguard poll found that American workers’ average 401(k) balance is about $112,572. However, because high and poor earners have different levels of savings, averages might be deceptive.
There is also the factor of geography. Residents in states with greater cost of living, like California and New York, sometimes require bigger retirement funds to maintain their living standards. On the other hand, states with lower living expenses, such as Arkansas and Mississippi, could need smaller nest eggs.
The following are some of the factors that affect the gap in retirement savings:
- Median household income.
- State-sponsored retirement incentives or programs.
- Prevalence of industries with strong retirement benefits.
The State of Retirement Savings: National Overview
Before diving into state-specific data, let’s look at national trends.
Key National Statistics
- Median Retirement Savings: A 2024 study by Fidelity found that the median retirement account balance for Americans aged 35-44 is $62,500, while for those aged 55-64, it is $134,000.
- Savings Gap: About 25% of Americans have no retirement savings at all, according to the Federal Reserve.
- Recommended Savings Benchmarks: Experts suggest having savings equivalent to 10-12 times your annual income by retirement age.
Despite these recommendations, a significant portion of Americans fall short.
State-by-State Retirement Savings Breakdown
To understand how much Americans save for retirement in each state, we’ll analyze savings trends using data from studies by financial institutions and government reports.
Top 5 States with the Highest Average Retirement Savings
- Connecticut: $188,000 (Average savings per household)
- Connecticut benefits from high average household incomes and access to employer-sponsored retirement plans in industries like finance and healthcare.
- Massachusetts: $448,5000
- With strong retirement plan participation and high education levels, residents of Massachusetts tend to save more.
- New Jersey: $160,000
- A combination of higher median incomes and strong public pension systems contributes to these figures.
- Maryland: $155,000
- Residents often work in government or professional services with robust retirement benefits.
- New Hampshire: $150,000
- The state’s relatively low tax burden allows residents to allocate more towards retirement.
Bottom 5 States with the Lowest Average Retirement Savings
- Mississippi: $57,000
- Lower median incomes and limited access to retirement plans contribute to low savings levels.
- Arkansas: $60,000
- Similar to Mississippi, Arkansas faces challenges with income disparity and lack of retirement education.
- West Virginia: $62,000
- Residents often rely heavily on Social Security, with limited personal savings.
- Alabama: $64,000
- Lower wages and less access to employer-sponsored plans are factors.
- New Mexico: $65,000
- The state’s rural population and income challenges contribute to lower savings rates.
Why does Massachusetts Have the Highest Retirement Savings?
DepositAccounts conducted research in October that found that the average household retirement savings balance in Massachusetts is $448,500. Among all the states examined in the report, that is the highest sum.
The personal finance website calculated the average amount of retirement savings held by households in each state using data from the most recent available U.S. Census Bureau survey, the 2022 Survey of Income and Program Participation. Balances in 401(k)s, IRAs, Keogh plans, and thrift savings programs are included in the totals.
Below are some reasons why Massachusetts have the highest retirement savings:
- According to a new Empower research, workers in Massachusetts receive the highest average incomes in the United States.
- The first state-level initiative to assist employees outside of corporate employment in increasing their retirement savings was put into place in Massachusetts.
- The state’s CORE program, which assists small nonprofit organisations in providing 401(k) benefits to its employees, was introduced in 2017. According to the state website, more than 200 organisations have signed up for the initiative as of May.
State-specific Factors Affecting Retirement Savings
- The Price of Living: Larger savings are frequently needed in states with high costs of living. For example, because housing and healthcare expenditures are greater in Hawaii, retirees require more money. States with a reputation for affordability, like Tennessee, on the other hand, have lower requirements.
- Levels of Income: Naturally, retirement savings are higher in states with higher incomes. Although differences still exist, inhabitants of states with substantial concentrations of high-income workers, such as California and New York, often have higher retirement funds.
- Availability of Retirement Plans: Plans offered by employers, such as 401(k)s, have a big influence on savings. States like Massachusetts or Maryland that have sectors that frequently offer these plans typically have greater savings results.
- Financial Literacy and Education: Retirement planning awareness is frequently higher in states with higher educational attainment. In places where savings rates are lower, financial literacy initiatives can help close the gap.
- Programs Sponsored by the State: For employees without employer-sponsored pensions, several states have implemented programs such as state-sponsored Individual Retirement Accounts (IRAs). For instance, the goal of California’s CalSavers program is to help lower-income citizens save more for retirement.
How Do You Compare?
- Assess Your Savings
To determine how your savings measure up, consider the following benchmarks by age group (based on Fidelity’s guidelines):
- By Age 30: Have savings equal to your annual salary.
- By Age 40: Have 3x your annual salary saved.
- By Age 50: Have 6x your annual salary saved.
- By Age 60: Have 8x your annual salary saved.
- By Retirement (65+): Aim for 10-12x your salary.
- State-Specific Adjustments
- Factor in your state’s cost of living. If you reside in a high-cost state like New York, consider aiming for the higher end of the recommended savings benchmarks.
Filling the Gap in Retirement Savings
Don’t freak out if you’re behind on your savings. To get back on track, follow these doable steps:
- Begin Saving Right Away: Starting is never too late. Compound interest allows for the gradual growth of even modest, regular payments.
- Get the Most Out of Employer Contributions: If your workplace offers a 401(k) match, make the most of it.
- Set Up Savings Automatically: Contributions to retirement funds can be automated to maintain regularity and curb spending temptation.
- Examine State Programs: Look into tax breaks or retirement programs offered by the state.
- Invest Sensibly: To balance risk and profit, diversify your investments. Getting advice from a financial expert can help you customise a plan to meet your needs.
- Cut Down on Debt: Paying off high-interest debt should be your priority if you want to save money for retirement.
In conclusion
Due to variables including salary, cost of living, and availability of retirement programs, retirement savings differ significantly across the United States. While some states have high average savings, others struggle with issues related to financial literacy and economic inequality.
The secret to effective retirement planning, no matter where you live, is to start early, save regularly, and make wise financial choices. You can strive towards a safe and satisfying retirement by being aware of where you stand and taking proactive measures.
What is the comparison for your state? Make use of this information as a guide and source of inspiration to improve your retirement savings plan. Your golden years will be better the earlier you act.
