The pension long has been a standard part of retirement for many Americans, particularly for public sector employees like police officers and teachers. Offering a pension — a set annual income for long-time employees after they retire — used to help attract quality employees by offering them the promise of financial security in their golden years.
Does the same hold true today? Private companies rarely offer pensions anymore, and states are struggling with pension commitments they made decades ago. The relative security of a pension is tied to the well-being of the government that offers it, and a great many U.S. states currently have unfunded pension liabilities.
See the five states that are well-prepared to continue funding their pension systems, and the five that might find themselves in fiscal hot water in the near future. Did your state make the list?
The Bottom Five
- 5. Texas
Texas had $401 billion in unfunded pension promises in 2020, up $100 million – or 33% — from 2019. Still, Odessa, Texas, is one of the best cities to retire on a budget of $1,500 a month.
4. North Dakota
North Dakota’s $12 billion in unfunded pensions for 2020 is the third-lowest total among all 50 states, but that was an increase of nearly 37% from 2019, the third-largest proportional increase in the nation.
The Bluegrass State has $102.4 billion in unfunded pension liabilities. Its per capita rate of $22,914 is the 10th highest in the U.S. A previous GOBankingRates study found that if you retire in Kentucky, you’ll need about $663,000, plus your Social Security payments, to fund your retirement.
While Utah’s $37 billion in unfunded pension liabilities is larger than only North Dakota’s among the bottom five, it’s up 52.4% from 2019. It costs $752,895, after Social Security, to comfortably retire in Utah – almost $100,000 more than in Kentucky.
1. New Jersey
With $254.4 billion in unfunded pensions, New Jersey is one of six states with liabilities of more than a quarter of a trillion dollars. It’s up more than 29% from 2019.
The Top Five
- 5. Louisiana
Louisiana’s per-capita unpaid pension liabilities are close to $20,000. Still, the total is less than $90 billion and had a year-over-year gain of less than 9 percent.
The Evergreen State has unfunded pension liabilities of $15,123 per capita for a total of $115 billion. Retirees in Bellevue, Washington, who bought a home there years ago are reaping the benefits now. The city is one of 11 identified in a recent GOBankingRates study where the average home price exceeds $1 million.
Michigan made headway in reducing its unfunded pensions, with the amount dropping by 2.18% — or $3 billion from 2019 to 2020. Pension or no, $1 million in retirement savings will last 23 years if you live in the Wolverine State
At just $6,435, the per-capita unfunded pension liabilities in Tennessee are the lowest the country.
Coloradans’ pensions might not be as solid as they would like, but if they own their own home, they might have some flexibility — and some equity. Zillow reports the typical home in Colorado is valued at $558,210. Colorado home values have increased by 23.5% over the past year.
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Methodology: GOBankingRates analyzed all 50 states in terms of three overarching factors: (1) Unfunded pension liabilities for 2019 and 2020, (2) unfunded pension liabilities per capita for 2019 and 2020, (3) funding ratio of public pension plans for 2019 and 2020, sourced from American Legislative Exchange Council. States were scored using these three factors, and scored their respective for year-over-year change for each metric. Scores were combined, with unfunded pension liabilities receiving half weight since larger states naturally have larger liabilities, while all other factors received full weighting. All data was collected and up to date as of March 7, 2022.