Updated on June 3, 2020
Folks know I’m biased towards West Coast living due to the weather, diversity, food, culture, and employment opportunities. Places like Portland, Seattle, LA, San Jose, and San Francisco are doing well due to the tech boom. The East Coast is nice, but it’s not the same. I did live in Virginia and New York from 1991 – 2001, so I do have perspective.
Despite all the job opportunities, it turns out the East Coast, the Midwest, and the Southern states dominate the retirement savings leaderboard according to aggregate data collected from Personal Capital’s 2 million user base. If you don’t know, Personal Capital is a leading digital wealth manager with the best free tools for managing your wealth online today. You can sign up for free here.
Let’s have a look at the data!
Retirement Savings By State
It’s surprising, yet not so surprising that residents of Delaware have the most amount of retirement savings. Delaware is #7 on the list of most number of millionaires per 1,000 households at 35. Meanwhile, Delaware is also one of the most tax friendly states with the following benefits:
- Social Security benefits are not taxed.
- No state or local sales tax.
- No inheritance tax.
- No personal property tax.
- State income tax ranges from 2.2% to 6.6%.
- Railroad Retirement benefits are exempt and taxpayers over 60 years may exclude $12,500 of investment and qualified pension income.
- Up to $12,500 of retirement income is tax exempt for those who are 60 and older.
Connecticut, New Jersey, Maryland, and Massachusetts have high tax rates, but also a larger amount of wealthier residents due to wealth centers in Boston, Washington D.C., and New York City. Residents of Alaska actually get a tax credit every year for living there.
The biggest surprise in the top 10 is Iowa at #6. I’ve been to Des Moines many times to see Principal Investments, one of the nation’s largest 401k providers. But other than Principal and the food processing industry, I’m not sure what other industries provide them with nation-leading retirement savings. Any Iowans out there care to share their source of wealth?
The biggest downside surprise is Hawaii at #46. The cost of living in Hawaii is regularly in the top three, which should portend to a higher retirement saving amount. But perhaps due to Hawaii’s high cost of living, a larger majority of retirement savings is spent to live.
Another reason for lower retirement savings could be due to multi-generations under one roof. Each individual/family might not need to therefore save as much compared to the individual/family who lives alone.
Given our earliest settlers started on the East Coast, it makes sense there is more wealth accumulated on the East compared to the West.
Related: The Best States For Retirement
Retirement Savings By Generation
In addition to providing analysis on retirement savings by state, Personal Capital also analyzed retirement savings by generation. As would be expected, the amount of retirement savings across all account holders rises with age.
Every single generation’s retirement savings amount looks pretty decent compared to the medians and averages across all Americans. So this begs two questions:
- Are wealthier people more proactive in managing their money with free financial tools?
- Or, do people who leverage free financial tools and actively manage their money tend to be wealthier than average?
I’m pretty sure there’s some truth to both. If you’re a regular reader on Financial Samurai, you can’t get enough articles about growing your wealth.
When I was in high school, I’d grab the following magazines in this order: MONEY, Fortune, Forbes, Car & Driver, and Sports Illustrated. I was so fascinated with money that I decided to major in Economics, get an MBA, work on Wall Street, and start a personal finance site! All of these activities helped me create wealth.
The Biggest Impact To Retirement Savings
Beyond when you were born or where you live, Personal Capital believes the biggest impact on retirement savings has to do with proactive planning. You can believe what we want, but when you’ve got a statistically significant amount of data like they do, it’s good to take notice.
They realized that users who created a retirement plan through the Retirement Planning Calculator had roughly 75% higher retirement balances than those who didn’t bother. That is a huge difference!
Due to Financial Samurai, I regularly set financial goals, write goal updates, and analyze successes and failures. There’s no doubt in my mind I’d be poorer if I wasn’t so focused on personal finance.
So for all of you who’ve been putting off analyzing your current financial situation, getting help from a financial expert, or setting some concrete financial goals, what are you waiting for? Get on it already!
You can track your net worth, plan for retirement, analyze your investments for excessive fees, manage your cash flow, and plan for retirement for free with Personal Capital. It’s all free and easy to use.