Nearly All States Miss Median Income Replacement Target

Older citizens in 47 states and the District of Columbia aren’t replacing enough of their pre-retirement income to meet the widely accepted 70% income replacement benchmark cited by advisory professionals, according to a new Bankrate.com study.

In particular, only seniors in Hawaii, Alaska and South Carolina meet the median 70% income replacement threshold. Nationally, the median income for those who are 65 and older is just 60% of the median income seen among 45- to 64-year-olds, indicating individuals around the U.S. have some serious ground to cover if they hope to have stable lifetime retirement incomes.

Researchers find the 15 states with the largest retirement income gaps are all located in the northern half of the country, with Massachusetts clocking in with the largest gap. Greg McBride, Bankrate.com’s chief financial analyst, says the numbers “help illustrate how underprepared many Americans are for retirement.”

“It’s especially important for Millennials to save aggressively because they face the biggest retirement savings burden of any generation in American history,” he suggests. While few Millennials will be able to rely on defined benefit pensions, they should be able to leverage lifelong participation to the defined contribution (DC) system to achieve a stable, self-funded retirement.

To construct its rankings, Bankrate.com examined the U.S. Census Bureau’s 2014 American Community Survey, the most recent edition available. For each state and Washington, D.C., Bankrate experts divided the median annual household income for those who are 65 and older by the median annual household income for those between 45 and 64 years old.

The full analysis, including state-by-state rankings, is online here.