The average American’s lack of savings paints a fairly discouraging picture of retirement. A GOBankingRates survey found that 40% of Americans have less than $300 in savings – putting a crimp in retirement savings. Many Americans see themselves working past age 65 out of financial necessity, according to the Pew Charitable Trusts, with some people planning to never retire at all. The pandemic may also have thrown some people’s futures into question, for those who had to draw from retirement savings during job loss or furlough.
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But the amount of money you need to retire depends on where you live, due to state-by-state differences in the cost of living. In some areas of the country, a nest egg of $550,000 may be sizable enough for retirement. In other regions, you have to build up your savings even more to reach at least $1 million in retirement funds.
To find out exactly how much you need saved to retire, GOBankingRates calculated annual expenditures for a retired person in every state after deducting Social Security income, based on data from the Bureau of Labor Statistics and the Missouri Economic Research and Information Center. The study assumed that you would draw down your savings by 4% every year to cover your living expenses, and states were ranked from the smallest nest egg needed to the biggest.
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GOBankingRates found that residents of many Southeastern and Southwestern states won’t have to put away nearly as much money for retirement, with states such Mississippi and Oklahoma requiring less than $600,000 in savings to retire. However, the residents of the Northeastern states aren’t so lucky — they claimed five spots among the bottom 10 states for the cost of retirement. To ensure smooth sailing in your golden years, make sure you’re using the right tools to save for retirement.
