The retirement crisis is real for a huge swath of Americans, with COVID-19 impacts heavily affecting retirement planning and saving. Americans have the least amount of savings in years, with 40% reporting that they have less than $300 saved away, according to GOBankingRates. With many looking for guidance in turbulent markets, understanding the retirement savings needs of clients means looking at where they live.
“We find that people’s savings can serve as a kind of litmus test for their financial well-being in general,” said Andrew Murray, content data researcher for GOBankingRates. “The 50-30-20 budgeting rule suggests people save 20% of their income, so when people don’t have any savings, or have to withdraw from it unexpectedly, it’s a good indicator that they are struggling financially.”
It’s no surprise that different areas of the country have different costs of living, but GOBankingRates pulled together data that includes the average annual expenditure of a retired individual in their state, minus Social Security income. The source of the data is the Bureau of Labor Statistics, as well as the Missouri Economic Research and Information Center, and the study was based on the premise of a 4% draw down annually from retirement savings.
The nest egg requirements ranged from the lowest at $506,702 (Mississippi) to the highest at $1,753,244 (Hawaii). The median for retirement needs was around $700,000. The majority of the least expensive states were in the Southern U.S., while many of the most expensive were in the Northeast.
The full breakdown of states, the average annual cost of living before and after Social Security, and estimated retirement savings required can be found here. While it is a comprehensive data analysis, the estimated numbers do not take into account the impact of inflation and rising interest rates.
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For more news, information, and strategy, visit the Retirement Income Channel.