Retirees need 70% of income, but most live on less

Financial planners say that you need 70% of your pre-retirement income when you retire. And if that's so, the vast majority of retirees aren't reaching that goal, according to an analysis by Bankrate.com. Bankrate used data from the Census Bureau's most recent American Community Survey. They divided the median annual household income for those who are 65 and older by the median annual household income for those in their later working years, between ages 45 and 64. Nationwide, retirees are averaging 60.37% of their pre-retirement income. “The numbers include everything — wages, salaries, tips, Social Security and welfare,” said Greg McBride, Bankrate's chief financial analyst. Retirees in just three states — Alaska, Hawaii and South Carolina — had more than 70% of their pre-retirement income. Alaskans were helped by dividends from the Permanent Fund, which is funded by oil and gas sales. Each Alaskan resident got $2,072 last year. Hawaii has a higher percentage of people with pensions than most states, and a tradition of three generations living together in one home. And South Carolina has seen an influx of wealthy retirees, as well as a high number of retired military. On the bottom tier: Massachusetts, where the average retiree is living on just 48.22% of his pre-retirement income, followed by North Dakota (48.99%) and New Jersey (51.95%). The main reason for the shortfall is, of course, inadequate savings, said Mr. McBride. For those states with the biggest retirement shortfalls, the culprit is high living costs. Obviously, one way to help clients in any state is to urge them to save more. “Consider working longer and taking Social Security later,” Mr. McBride said. Or consider moving to a state with lower taxes, housing and other costs. The median home price in Austin, Texas, is $269,700, according to the National Association of Realtors. “Florida and Texas have more going for them than sunshine,” Mr. McBride added.