Retirees need 70% of their pre-retirement income but most live on less: Bankrate

Retirees need 70% of their pre-retirement income but most live on less: Bankrate
MAY 26, 2016
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.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.