For Americans in search of a financially-secure retirement, some states may be better than others, according to a new, nationwide analysis conducted by the National Institute on Retirement Security (NIRS).
The not-so-secret reality of an aging national population is increasingly calling attention to the monetary challenges faced by adults as they begin to leave the workforce. High healthcare and housing costs, coupled with insufficient savings and pension payments, are deflating the retirement dreams of many seniors.
“The retirement savings shortfall has become increasingly important at the state level because policymakers understand that it can have profound impacts on strained state budgets,” says Diane Oakley, executive director of the NIRS. “We know that the largest source of retirement income for most Americans is Social Security, but this federal program typically provides only a fraction of what most people need to be self-sufficient.”
Most states in a sorry state of financial affairs
The goal of the NIRS report was to pinpoint those states with the best and worst economic outlook for future retirees.
The analysis was conducted on a set of financial variables, including: tax rate on pension income, percentage of workers participating in an employer-sponsored retirement plan, average contribution made to a retirement account (such as a 401(k)), number of households whose housing payments were greater than 30 percent of their income, average out-of-pocket expenditures for Medicare beneficiaries, average Medicaid spending per elderly patient, and hourly earnings and unemployment rates for people 55 and older.
States were graded on a scale of one to ten (one being the lowest; ten, the highest) for each of the eight factors.
Researchers gathered financial data from three different years: 2000, 2007 and 2012. The first two years—2000 and 2007—occurred just before the country’s last two economic recessions, while 2012 was the most recent year in which the data on each of the factors was collected.
Among the investigation’s most interesting findings:
Wyoming is the most financially-stable state for aging Americans: Wyoming was the only state to score an eight or nine in each year that data was gathered. New Hampshire, Iowa and North Dakota were close behind in terms of dependability—each scored a mixture of sevens and eights during those years.
California is consistently at the bottom: Tarnished by low marks in both the retirement income and cost categories, the Golden State scored an average of two for overall financial strength for retirees in each year studied. Florida and Georgia also experienced issues, earning twos and threes across the board.
Nobody’s perfect: No state received top marks on every financial factor, and no tens were earned by any state, on any factor, though some received ones on retiree cost and employment opportunity measures. “In every state, an aging workforce faces an insecure economic future,” state study authors.
Housing costs are a concerning issue: Nearly one-third (30 percent) of all seniors in 31 states forked over at least 30 percent of their income each month to put a roof over their heads in 2012. This is a significant jump from 2000, when only 14 states experienced problems with excessive housing costs.
Retirement savings are declining: Spurred by a sluggish economy, perhaps, fewer workers are saving money via a pension or 401(k) program. Indeed, in 2012, Iowa ranked highest in this variable, despite having only 54 percent of private employees contributing to retirement plans.
Older workers need better employment options: Employment opportunities for Americans age 55 and older are looking increasingly bleak. In 2012, unemployment levels among aging adults ranged from 6.8 percent in Washington, to 2.2 percent in North Dakota. That same year, older workers in Alaska earned an average of $18.00 an hour, while their peers in Tennessee earned just $12.50. “Improving future financial security of an aging population requires ensuring good employment options for older workers,” according to the report. “The data suggest that policymakers in all states have their work cut out for them when it comes to creating real financial security for their aging populations.”
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