Gen X retirement: 45% face shortfalls
Retirement is supposed to be a golden phase, but for many Gen Xers it might not be.
Cheddar
Seniors are likely to outlive their retirement savings in 41 states, according to a new analysis.
Americans fear outliving their money as much as any other potential retirement setback, including failing health, according to a June report from the nonprofit Transamerica Center for Retirement Studies.
Another recent survey, from Allianz Life, suggests we fear running out of money more than death itself.
The average retiree faces a $115,000 shortfall
The new report, published by the senior living platform Seniorly, tabulates projected retirement income and expenses in every state, starting at age 65.
Here’s what the analysis found:
On average, an American retiree can expect about $762,000 in income from Social Security and other benefits, savings and investments. The typical retiree can expect living expenses of $877,000 in retirement. That leaves an average retirement shortfall of $115,000.
“Where you retire can be just as important as how much you save,” said Christine Healy, chief growth officer at Seniorly.
The report draws on state-level estimates of life expectancy at age 65 (around 18 years, on average), average retirement benefits, median net worth and expected retirement expenses.
Retirees typically rely on Social Security to cover many of their expenses, along with retirement savings. Social Security benefits don’t run out, but savings can. That’s why many Americans speak of a need for $1 million or more in savings to fund a retirement that could stretch 30 or 40 years.
“In some states,” the Seniorly report found, “affordable living costs and modest expenses make it easier to stretch savings and maintain a decent quality of life. In others, high prices can drain those savings long before a person’s needs begin to decline.”
Not surprisingly, seniors are more likely to outlive their savings in states with notoriously high living costs, including New York, California, Massachusetts, Alaska and Hawaii.
By contrast, retirees enjoy a financial edge in Washington State, Utah, Montana and Colorado, where residents enjoy high retirement income and expenses that, while not low, are relatively manageable.
“The findings highlight that location matters greatly —not just income levels, but how those dollars interact with cost of living, longevity, and healthcare needs,” Healy said.
Where are seniors most likely to outlive their savings?
Here are the 10 states, including the District of Columbia, where seniors are most likely to outlive their savings:
New York. The average senior can expect about $1.1 million in expenses and $670,000 in income over a retirement lifespan of 19.4 years. Projected shortfall: $448,000.
Hawaii. Seniors can expect $1.3 million in income and $1.7 million in expenses over a 20.6-year retirement. Projected shortfall: $417,000.
District of Columbia. Expenses average $1.1 million and income averages $736,000 over an 18.3-year retirement. Projected shortfall: $407,000.
Alaska. Income averages $712,000 and expenses average $1.1 million over a 17.9-year retirement. Projected shortfall: $342,000.
California. Seniors can expect $926,000 in income and $1.3 million in expenses over a 19.3-year retirement. Projected shortfall: $337,000.
Massachusetts. Income averages $1 million and expenses average $1.3 million over a 19.6-year retirement. Projected shortfall: $294,000.
Rhode Island. Seniors can expect income of $676,000 and expenses of $960,000 over a 19-year retirement. Projected shortfall: $284,000.
Vermont. Retirees can expect income of $771,000 and expenses of $1 million over a 19.4-year retirement. Projected shortfall: $248,000.
Louisiana. Over a 16.8-year retirement, income averages $479,000 and expenses average $724,000. Projected shortfall: $244,000.
Connecticut. Retirees can expect income of $851,000 and expenses of $1 million over a 19.9-year retirement. Projected shortfall: $193,000.
In these 9 states, retirees can expect a “surplus”
The report found only nine states where retirees can expect a financial surplus in retirement, through some combination of lower expenses and higher income.
Here are the retirement “surplus” states:
Washington. Retirees can expect a whopping average income of $1.1 million and expenses of $989,000 over a 19.1-year retirement. Projected surplus: $146,000.
Utah. Seniors can expect income of $944,000 and expenses of $873,000 over an 18.8-year retirement. Projected surplus: $121,000.
Montana. Expenses average $820,000 and income averages $863,000 over an 18.4-year retirement. Projected surplus: $43,000.
Colorado. Income averages $956,000 and expenses average $918,000 over a 19.1-year retirement. Projected surplus: $38,000.
Iowa. Retirees can expect income of $802,000 and expenses of $770,000 over an 18.6-year retirement. Projected surplus: $32,000.
Minnesota. Expenses average $840,000 and income averages $863,000 over a 19.4-year retirement. Projected surplus: $23,000.
Maryland. Seniors can expect income of $1 million and expenses of $993,000 over an 18.7-year retirement. Projected surplus: $13,000.
Kansas. Retirees can expect income of $755,000 and expenses of $746,000 over an 18-year retirement. Projected surplus: $8,000.
South Carolina. Seniors can expect income of $763,000 and expenses of $761,000 over a 17.4-year retirement. Projected surplus: $2,000.
Here are some tips to avoid outliving your retirement savings:
Don’t underestimate how long you will live
American life expectancy is about 78 years. By the time you reach retirement age, however, your life expectancy is longer. A woman of 70, for example, can expect to live to 87.
Many older Americans don’t know how long their own retirement is going to last: in other words, how long they are going to live.
Longevity literacy matters in retirement planning. If your retirement budget assumes you will live to 75, and you make it to 95, you will probably run out of money.
Maximize your retirement savings
One sure-fire way to build retirement savings is to make aggressive contributions to a workplace retirement account.
The most successful retirement savers typically start saving early, contribute at least 10% of their income to a 401(k)-type account, and save continuously until they retire.
And try not to raid your retirement savings for a household expense. Instead, open an emergency savings account.
Claim Social Security later
The longer you wait to claim Social Security, the larger your monthly benefit checks will be.
Based on the longevity figures above, you’re generally better off to claim Social Security later in life, if you can afford to wait. Ideally, wait until age 70, when your monthly benefit maxes out.
In a recent story, USA TODAY explained the math behind that rule of thumb.