A new study examines geographical differences in retirement readiness.
When it comes to retirement readiness, the northeast is stellar. The rest of the country, not so much.
The newest generation poised to save for retirement — millennials — is struggling to get prepared, too, according to a Personal Capital study released Monday that highlights retirement readiness.
“Unfunded retirement is by far the largest looming financial crisis we face,” said Bill Harris, chief executive of Personal Capital, a hybrid online investment platform. “We just absolutely have to turn this around.”
Delaware is currently ranked first for being most prepared, with the highest average amount of savings across all generations at roughly $286,000. Connecticut is second with $279,000 and New Jersey is right behind with about $273,000.
Meanwhile, other states don't have such high averages. California, for example, is in the 20th spot with $227,000 saved, and Wyoming is dead last at $153,000.
COST OF LIVING
Mr. Harris attributes this geographical difference to the cost of living and higher incomes in the northeast compared to the rest of the states. With a higher income, employees are able to put away more for what they expect to need to survive at their current lifestyle in retirement.
Regardless, behavioral finance needs to be applied in states where investors' savings is less.
“The trick is to get people to commit today,” Mr. Harris said. “What we do all day long is think about where we're going to lunch, and to get work done, and do dry cleaning, and we spend almost all of our time thinking of our current selves.”
“In order to get people to plan effectively, they have to put themselves in a future mindset,” he said.
Millennials, the youngest generation thinking of retirement savings, is facing challenges. The study took into consideration the fact that millennials have had the fewest years to save, but data found that that generation also plans to work for just 15 years and save about $446,000.
Millennials also expect a hefty inheritance, of about $1.06 million, which is twice as much as their expected paycheck incomes. Their spending goals strongly vary from preceding generations. As far as big milestones, they plan to spend less on such purchases as a house or vacation. But they also plan to spend more on charities.
