The 10 Best and Worst States for Retirement Savings

Are ready are you for retirement? Are you on the right path?
The budgeting and retirement planning platform Personal Capital took a look at how we are doing following the 2020 pandemic year and found some interesting results – where its 2.8 million users live and their ages had distinct disparities.
Here’s what it found.

Key findings

East Coasters sock away more

Not only is the No. 1 state for retirement savings in New England, all but two states in New England made the top 10, and seven of the top 10 states were East Coast states.

Tax burdens have an impact

States, as we know, have different tax burdens than others, including property tax, individual income tax, and sales and excise tax. There was a correlation between retirement savings and tax burdens.

Millennials are ahead of the game

While the 182,774 Baby Boomers users have an average retirement balance of $1,029,840, there are more than 700,000 Millennial users. The average retirement balance is only $166,430, but they have twice as long to get their balances increased and have gotten an early start by using budgeting and planning software.
Millennials have the greatest number contributing to their 401(k) every paycheck and not withdrawing early from retirement accounts. Once lockdown took place in March 2020, those in their 20s and 30s remained pretty steady on contributions to their 401(k)s while the biggest dip was made by those closer to retirement years.

The Worst States for Retirement Savings

10. Tennessee

Tennessee
  • Average retirement savings: $358,963
  • Income tax rate: None
  • Cost of living: 90.53

9. Nevada

Nevada
  • Average retirement savings: $356,973
  • Income tax rate: None
  • Cost of living: 106.02

8. West Virginia

West Virginia
  • Average retirement savings: $354,018
  • Income tax rate: 3.54% - 6.50%, the highest applicable to $60,000 plus incomes
  • Cost of living: 100.68

7. Hawaii

Hawaii
  • Average retirement savings: $345,401
  • Income tax rate: 1.40% - 11%, the highest applicable to $200,000 plus incomes
  • Cost of living: 195.80

6. Arizona

Arizona
  • Average retirement savings: $345,267
  • Income tax rate: 2%59 - 8%, the highest applicable to $250,000 plus incomes
  • Cost of living: 99.51

5. Mississippi

Mississippi
  • Average retirement savings: $340,894
  • Income tax rate: 3% - 5%, the highest applicable to $10,001 plus incomes
  • Cost of living: 84.78

4. Oklahoma

Oklahoma
  • Average retirement savings: $340,389
  • Income tax rate: 0.50% - 5%, the highest applicable to $7,200 plus incomes
  • Cost of living: 89.78

3. Washington, D.C.

Washington DC
  • Average retirement savings: $325,671
  • Income tax rate: 4% - 8.95%, the highest applicable to $1 million plus incomes
  • Cost of living: 157.70

2. North Dakota

North Dakota
  • Average retirement savings: $310,766
  • Income tax rate: 1.10% - 2.90%, the highest applicable to $440,600 plus incomes
  • Cost of living: 97.91

1. Utah

Utah
  • Average retirement savings: $300,392
  • Income tax rate: 4.95%
  • Cost of living: 96.81

The Best States for Retirement Savings

10. Minnesota

Minnesota
  • Average retirement savings: $447,836
  • Income tax rate: 5.35% - 9.85%, the highest applicable to $166,040 plus incomes
  • Cost of living: 103.08

9. Washington

Washington State
  • Average retirement savings: $447,869
  • Income tax rate: None
  • Cost of living: 123.78

8. Massachusetts

Massachusetts
  • Average retirement savings: $457,681
  • Income tax rate: %%%
  • Cost of living: 124.45

7. Maryland

Maryland
  • Average retirement savings: $458,107
  • Income tax rate: 2% - 5.75%, the highest applicable to $250,000 plus incomes
  • Cost of living: 121.01

6. Vermont

Vermont
  • Average retirement savings: $467,757
  • Tax rate: 8.75%
  • Cost of living: 115.56

5.Virginia

Virginia
  • Average retirement savings: $468,579
  • Income tax rate: 2% - 5.75%, the highest applicable to $17,001 plus incomes
  • Cost of living: 104.86

4. Alaska

Alaska
  • Average retirement savings: $489,070
  • Income tax rate: None
  • Cost of living: 124.09

3. New Jersey

New Jersey
  • Average retirement savings: $489,664
  • Income tax rate: 1.40% - 10.75%, the highest applicable to $1 million plus incomes
  • Cost of living: 114.03

2. New Hampshire

New Hampshire
  • Average retirement savings:$494,562
  • Interest tax rate: 5%
  • Cost of living: 111.25

1. Connecticut

Connecticut
  • Average retirement savings: $523,568
  • Income tax rate: 1% to 13.30%, the highest applicable to $1 million-plus incomes
  • Cost of living: 119.11

Covid’s Role

Covid Retirement
Of course, living during a pandemic means life changes and Personal Capital’s survey of more than 100 users also showed interesting results. While naysayers cry out that 23.8% of the users decreased their retirement contributions and 18.3% ended them entirely, the flipside is more than 51% percent of users did not end retirement contributions because of the pandemic. Another 50% also didn’t postpone contributions to their retirement accounts, and more than 49% kept their accounts untouched.
Instead, the pandemic is resulting in more people being careful about the future with nearly 20% doubling down and increasing contributions to their retirement and over 42% taking on a side hustle to save more money.

4 Tips for Saving for Retirement

Financial planners suggest saving a minimum of 10% to 15% of your income for retirement, although many are fans of the 50 30 20 Rule, which suggests 20% of your income should be placed into retirement funds. Here’s how.

1. Contribute to a 401(k)

The majority of your retirement savings should go into a 401(k) or Roth IRA. Shoot for 15% of your income going into these accounts. If that feels too high at the moment, contribute the highest percentage that your company provides an employer match on, which can double your contributions.

2. Contribute to an IRA

If your workplace doesn’t offer a 401(k), enroll in an IRA, which is an individual retirement account that comes with tax benefits. A traditional IRA is similar to a 401k with tax-deferred contributions and is available to workers who do not have a 401k or IRA offered by an employer. A Roth Ira is also popular as it is supplemented with after-tax dollars, meaning when you retire your money is yours, and you can enroll in a Roth even if you have an employer-sponsored IRA.

3. Budget

If you don’t know where your money is going, you won’t know how to save it. Create a budget and keep track of where your money goes. Be sure to include retirement savings and pay your savings as if you would pay a bill. Following the 50 30 20 Rule, 50% of your expenses should go toward bills and expenses, 20% towards savings, and 30% towards discretionary spending. By budgeting, you can spot if your bills and expenses are higher and prevent you from reaching your 20% goals. Make adjustments, as needed.

4. Reduce your debt

If you have debts with high interest rates, paying these off before you save may be beneficial. With a credit card carrying a 24% interest rate versus a high-interest savings account offering 2% interest, it makes sense to stop paying interest on balances. Use your budget to plan a pay-off schedule. Some debt payoff strategies include the snowball method, where you pay off your smallest debt first, then put the money that would have gone into paying that debt into the next debt and so on and so on, like a snowball rolling down a hill and getting larger and larger with momentum.

Methodology

Personal Capital anonymously reviewed its 2.8 million users’ databases to uncover trends in retirement. It first looked at these results six years ago but after 2020's pandemic decided to take another look to see what has changed.

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