Top 5 States to Save for Retirement
Right now, roughly half of Americans are struggling to save for retirement. Many of the already retired are relying on Social Security for more than half of their retirement income.
What are the external factors that contribute to these numbers and what can we do today to increase our odds of a prosperous retirement?
It turns out that the state one lives in can heavily impact the journey to a comfortable retirement. A list recently published by Forbes identified five states that are the best for saving for retirement.
The factors Forbes used to calculate the “winners” of this comparison are:
- average income
- employer retirement plan participation
- home value
- home value gains
- existing retirement savings
- cost of living
- tax burden
- unemployment index
The five states that top the Forbes list have the best ratio of these metrics. This means that the state could, for example, have high average income and homes with a high value on the market but high taxes. Other times, it could be a combination of cheaper living costs and lower taxes against moderate average income.
These are the top five states from the list.
1. New Hampshire
New Hampshire scores the highest in almost all categories. It ranked second among all 50 states when it comes to the amount of existing retirement savings. It also ranked sixth in employer retirement plan participation.
Average income, tax burden, and average home value are also excellent in comparison to the other states. The only aspect that could be improved is the cost of living. Based on this metric, the Granite State ranks 37th, which, albeit not the lowest ranking, could certainly be better.
Washington took second place solely because of the high average home value. It is the fifth fastest-growing state for property gains and an excellent environment for preparing for retirement through property equity building. Having enough home equity also makes for a more straightforward reverse mortgage process.
Washington also has high employer retirement plan participation and income. However, those contemplating moving to Washington should prepare for the high cost of living in this state.
3. North Dakota
North Dakota made the list thanks to its multiple excellent rankings. It’s the state with the lowest unemployment rate, and having a steady job with a reliable income is fundamental for accomplishing your retirement savings plans.
Low taxes, for which North Dakota ranks 9th, allow for more money to go into your IRA account. It would probably have ranked better if its residents were keener on putting money aside for retirement.
However, that is decidedly not the case, as the state ranks 49th, just barely escaping the title of the state with the lowest amount saved.
4. South Dakota
South Dakota scores well across the board: It has a low cost of living, low unemployment rate, and moderate average income. It also ranks great in terms of employer retirement plan participation, sharing 8th place with Washington. Tax doesn’t overburden Dakota residents either, as the state is 14th on the list in that respect.
On the downside, people looking to settle their retirement issues through home equity will find average home value to be less excellent. The average gains for home values are right in the middle. Still, a steady job, low taxes, and moderate living costs are the essential ingredients for cooking up a good retirement plan.
They might even leave you with a bit more money at the end of each month that you can put in a decent high-yield savings account and make your money work for you while you sleep.
Colorado is the fifth state on the list that allows for some quick savings for retirement. It boasts high home values and home value gains, ranking 5th and 7th for those, respectively. The average income is more than decent, and the tax burden is on the lower side.
The only real downside of saving for retirement in Colorado is the high cost of living. It is lower than the one in Washington, though.
Unfortunately, though, if the current situation is anything to go by, the picture is not so encouraging. Colorado is in the bottom half when it comes to employer retirement plan participation. It also ranked 21st among all states in current average retirement savings.
The Best States per Category
While these states topped the list on average, the winners of specific categories are also worth mentioning.
For example, Wisconsin and Minnesota have 61% of eligible employees actively contributing to their retirement savings through their 401(k)s and other plans.
Mississippi ranks the highest on the cost-of-living index, while Connecticut tops the per-capita income list with an average income of $87,695. Its residents also have the highest retirement savings.
North Dakota and Nebraska have the lowest unemployment score, and Hawaii stands out as the state with the hottest housing market, with an average single-family home value currently standing at $730,511.
While these findings may not be the sign it’s time to pack your suitcases and move to another state, they do give a good overall picture to anyone setting up their retirement plans.
Matching your financial lifestyle to that of the best-performing states’ residents could be a step worth taking in your strive for a carefree retirement.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
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