(This article previously appeared on the PBS NewsHour site, www.pbs.org/newshour.)
Many Americans dream of retiring to the Sunbelt, where they can live out their work-free years playing on sun-kissed golf courses and lounging poolside. But a new analysis by the National Institute on Retirement Security (NIRS) finds that when choosing a place to retire, you might want to consider trading your Bermuda shorts for ear muffs.
Overwhelmingly, cold states and states in the upper Midwest ranked more financially secure for retirees.
The 5 Most Retiree-Friendly States
Wyoming, Alaska, Minnesota, North Dakota and Iowa boast more generous benefits, more working opportunities and better-funded services for retirees than popular retirement destinations like Florida and Arizona. (You can find out where your state ranks here.)
Some state governments are stepping in where the federal government is failing to provide aid for financially insecure seniors, said Nari Rhee, research manager at the National Institute on Retirement Security.
(MORE: America’s 10 Fastest-Growing Places to Retire)
And in the coming years, retiring Americans are going to need all the help they can get.“We’re screwed,” said Rhee. She was referring to the dual issue of workers who want to maintain their standard of living when they retire but don’t have enough socked away in savings accounts.
Making Ends Meet in Retirement
“The Employee Benefit Research Institute [EBRI] estimates 44 percent of baby boomers and Gen X’ers will not have enough money to meet even basic expenses in retirement,” Rhee said. “We’re not just talking about people experiencing downward mobility, but of people having a hard time making ends meet.”
PBS NewsHour has reported on how much Americans worry about their retirement. Another recent survey by EBRI showed that nearly half of Americans have little or no confidence they’ll have enough money for a comfortable retirement. More than ever before, Americans are likely to face a downgrade in their economic mobility when they retire. And almost half haven’t saved anywhere near enough for retirement.
How States Are Reacting
With the near-record lack of confidence coupled with overall low balances in retirement accounts, Rhee points to how states have begun taking on retirement security policies.
“States are increasingly concerned about this,” she said. “We’re not seeing a lot of federal action. So some states are stepping in, saying, ‘What can we do to help increase savings?’”
States need to play a role, Rhee says, because the current private-sector plans that leave the financial decisions to the employee — including how to invest and whether to participate in the first place — are doomed for failure. No country that has a voluntary retirement system, she says, has good outcomes.
“The countries that do well with people having enough income [for retirement] is where they make it mandatory, quasi-mandatory or at the very least automatic,” Rhee said. “We shouldn’t have a retirement system predicated on people being financial wizards.”
How the Survey Was Done
To assess how well states rank, Rhee and others at NIRS considered a variety of factors (ranging from average retirement account balances to the unemployment rate for seniors) to determine the level of financial pressure retirees, on average, would likely face in their state. The result was a comparative ranking.
A major source of financial pressure comes from the costs associated with long term health care, estimated at $426 billion a year and including $234 billion of informal care. The Medicare out-of-pocket costs is an indicator of local health care costs.
“Conditions for future retirees vary at state levels,” Rhee said. “All states are struggling, but at the same time, some states do better than others. California is really poorly-off in terms of housing costs, medical costs, unemployment and wages. Wyoming has the second most generous Medicaid program in the country and relatively high workplace retirement coverage.”
One of the main goals of the report was to help states understand where policymakers need to pay more attention. More and more states, Rhee said, are recognizing there is a problem.
“At the end of the day it’s still coming out of their pay. They’re still being responsible, you’re just making it easier on them,” Rhee said.
The Silver Lining for Future Retirees
On the upside, Rhee notes that a silver lining to the report’s findings is that state legislators and others can move towards changing the course of savings programs so future retirees aren’t staring down the loss of their financial independence when they retire.
“There is time for states to set up programs so workers who are in their 20s, 30s, 40s now will have a better outcome,” she said. “If they act now.”
You can see NIRS’ full report, The Financial Security Scorecard: A State-by-State Analysis of Economic Pressures Facing Future Retirees, including detailed analysis of variables and methodology, here.
Elizabeth Shell is a Data Producer for PBS NewsHour.