Note: This story is sponsored by The Alliance for Lifetime Income.
“Time is on my side, yes it is.” – The Rolling Stones
When it comes to life that may actually be the case – particularly if the reviews for the Stones concert tour are to be believed. “The Rolling Stones Want To Teach You To Live Forever,” read the headline of the rave from Washington Post music critic Chris Richards. “This wasn’t a band of survivors reenacting their once-greatness,” he wrote. “This was the greatness.” It’s clear that the Stones are redefining retirement and have become symbols for millions of Americans of what it’s like to live life to its fullest.
Living that long on less than a music icon’s income, however? That takes resources. In terms of guaranteed lifetime income we can count on, Social Security covers about 40% of pre-retirement income on average, according to the Social Security Administration. The rest is up to you – and me.
How are we doing with that? That depends on how much you’ve saved, of course, when you plan to retire, and if you have supplemental sources of guaranteed income to fill the gap in what Social Security provides. But it also depends on the cost of living and taxes in your chosen area and the opportunity to work in retirement. Some places – like some people – are faring better than others.
According to the Regional Summary of the Protected Lifetime Income Index conducted by the Alliance for Lifetime Income, two in five Americans will have some other form of income that will last throughout retirement – typically a pension or annuity – to supplement Social Security. The numbers are higher in the Northeast where 45% have the added retirement paycheck, followed by 40% in the West, 36% in the Midwest and 34% in the South. But there are state-by-state differences as well.
So, with the Stones tour as our landscape, we decided to take a look at how people in the states and cities the band is visiting this summer are prepared for retirement. We are using data from HowMuch.net on the slice of basic monthly living costs the average ($1,295) Social Security benefit will replace state by state, plus some data points from the Financial Security Scorecard from the National Institute on Retirement Security. (Note: Although the research was conducted in 2012, additional research from the Pew Charitable Trust and EBRI confirmed that the trends remain the same.)
- Philadelphia, PA. Social security will replace just 44% of the $2,943 in monthly housing, food, utilities, transportation and healthcare that Pennsylvanians pay each month. Pennsylvania residents have close to $41,000 in their 401(k)s and similar retirement plans, an amount greater than most of the nation, yet not even enough to cover a single year of average earnings. Pennsylvania also benefits from more-than-average work opportunities and a higher-than-average median wage for older workers.
- Chicago, IL. Social Security will cover 41.4% of the average $3,125 Illinoisians pay in monthly basic costs. Less than half of workers in the state of Illinois were in a work-based retirement plan at the time of the survey. (That should be changing shortly with the 2018 launch of Secure Choice, a state-sponsored program that offers small employers a way to help their employees save with payroll deductions.) On average, Illinois residents have about $45,000 in their plans – again, not even one time their annual income, but significantly more than the national average. Also, the average median wage for older workers is better than most of the country, but the work opportunities pale.
- Washington, D.C. The high cost, in particular, of housing is responsible for the fact that Social Security will cover just 28.8% of the $4,491 in monthly basic expenses of a DC resident. Additionally, the average retirement balance in DC was approximately $35,000 when this survey was conducted – well below the average $82,000 Washingtonians earned each year. Employment opportunities for older workers are among the lowest in the country and the median wage is also lower than average, combining to form a grim retirement picture in our nation’s capital.
- New Orleans, LA: Social Security covers a greater-than-average 46% of basic monthly expenses, with an average $2,812 for residents of the Pelican State, thanks largely to lower-than-average housing costs. However, the state has a lower-than-average number of participants in work-based retirement plans and a low average balance at $34,000, again not even enough to cover a single average year of income, which is $59,000 for this state. On the plus side, the unemployment rate for older workers in Louisiana is better than average, though wages skew a bit lower.
- Foxborough, MA: Higher than average costs for housing and healthcare are to blame for the fact that Social Security will cover just 31.6% of the $4,100 in average basic monthly expenses in Massachusetts. Roughly one half of residents are in a retirement plan at work. Those who are have saved just $23,000 on average – not even one-third of the average earnings of a worker in the state when the research was conducted. Although the unemployment rate for older workers is slightly higher than the national average, the median wage for those workers is significantly higher boosting the state’s score.
- New York City (East Rutherford, NJ): Housing and transportation costs are higher in New York State than much of the country, a large reason Social Security will cover only 34.2% of an average New Yorker’s basic monthly expenses of $3,798. Additionally, just 45% of New Yorkers are in a work-based retirement plan. And the amount those workers have racked up – just $31,000 when the research was conducted – was again less than half what a worker in the state earns on average each year. That’s a tough situation in a state where housing costs are among the highest in the country compared to income. The unemployment rate for older workers is the 11th highest in the country, but hourly wages were higher than average.
- Houston, TX. Social Security covers 42.8% of the $3,027 in average basic monthly costs Texans face each month. Fewer than four in 10 workers in the state of Texas are in a work-based retirement plan. Their average balance is $32,000 about half of what Texans earn, again on average, each year. A low unemployment rate for older workers is a plus, but balanced by an unfortunately low median wage.
- Denver, CO. Just 36.3% of the $3,572 in basic bills that Colorado residents rack up on average each month are covered by Social Security. Fewer than half of workers in the state of Colorado are in a work-based retirement plan and the amount they’ve saved – $28,000 on average in 2012 – was well under half of the $71,000 a worker earned per year. The average wage for older workers was among the highest in the country at over $16 an hour, but the unemployment rate for older workers was unfortunately high.
- Seattle, WA: Social Security covers 35.4% of the average monthly bills of $3,653 residents of Washington accumulate. Although fewer than half of Washington State residents are in a work-based retirement plan, and their average balance of $35,000 is about half of what the average resident earns per year, the state benefits from having no income tax (and therefore no tax on pension income). However, the state does boast the second highest in the country hourly wage for older workers ($17.50), despite a higher than average unemployment rate.
- Santa Clara and Pasadena, CA. The high cost of housing is again to blame for the fact that Social Security covers just 29.1% of the average $4,451 in basic monthly bills folks in the Golden State typically tally. Additionally, only 40 percent of workers are in a work-based retirement plan and those who are have saved just $23,000, less than a third of the average worker’s earnings. As work opportunities go for older workers, California is average, although the hourly wage for those workers who do find employment is relatively high.
- Miami and Jacksonville, FL: Social Security will cover 39.9% of the average monthly expenses of $3,250 a Florida resident can plan on. Just one-third of Florida’s workers are in a work-based retirement plan. Those who are have saved about $24,000 on average, again far less than half the amount a worker in the state earns annually. The unemployment rate for older workers was comparatively high in 2012 with the median wage lower than average.
- Glendale, AZ: Social Security will replace a relatively high 43.3% of the $2,991 in basic monthly expenses it costs to live in Arizona. Less than 4 in 10 employees are in a work-based retirement plan. Those who are have an average balance of roughly $24,000 a far cry from the $63,000 workers earned annually in the state. In addition, the unemployment rate for older workers was higher than average and the median wage lower than average.
For more information, visit www.RetireYourRisk.org.
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