Retirees expected to need $1.34 million but projected income falls far short
Only nine states projected to have retirement surpluses
California retirees are expected to fall nearly $400,000 short of the money needed to cover their retirement expenses, according to a new report highlighting the growing financial challenges facing older Americans.
The study by long-term care provider CareScout found that retirees in 41 states and the District of Columbia are projected to exhaust their savings during retirement because their expected income will not be enough to cover essential living expenses.
The report analyzed retirement finances for a typical 65-year-old by comparing projected lifetime expenses with expected income from Social Security, retirement savings, and investments, while also factoring in life expectancy.
Nationwide, the average retiree faces a $109,000 funding gap. The typical American is expected to receive about $788,000 in retirement income but spend approximately $897,000 on housing, healthcare, and other basic living expenses.
CareScout said that while Social Security provides a dependable lifetime income stream, it is generally insufficient to cover all retirement expenses, forcing many retirees to rely heavily on personal savings that may eventually run out. Financial planners increasingly estimate that Americans may need $1 million to $2 million in retirement savings to maintain their standard of living.
California ranked third among states with the largest retirement shortfalls. The average retiree is expected to need about $1.34 million during retirement but will have only about $943,000 in projected income, leaving an average deficit of $395,000.
New York recorded the nation’s largest shortfall at $471,000, followed by the District of Columbia at $432,000. Other states with significant retirement funding gaps included Alaska ($350,000), New Mexico ($277,000), Louisiana ($241,000), Arkansas ($237,000), Vermont ($232,000), Kentucky ($209,000), and Rhode Island ($200,000).
Researchers attributed California’s large shortfall to its high cost of living, particularly elevated housing and healthcare expenses, which continue to outpace retirement income despite relatively higher earnings.
Only nine states were projected to generate retirement surpluses. Washington ranked first, with retirees expected to finish retirement with an average surplus of $276,000. New Hampshire ($240,000), Colorado ($188,000), Nebraska ($145,000), Idaho ($112,000), Minnesota ($109,000), Utah ($79,000), Maryland ($21,000), and Montana ($19,000) also posted positive retirement balances.
Those states generally benefit from a combination of lower living costs and higher retirement incomes or household wealth.
CareScout CEO Samir Shah said many Americans underestimate how much money they will need throughout retirement.
“People are entering retirement without fully understanding the financial resources required to support a longer lifespan,” Shah said. “Creating a realistic retirement plan is more important than ever.”
Financial experts recommend increasing retirement savings throughout one’s working years and delaying Social Security benefits whenever possible. Since monthly Social Security payments increase for each year benefits are postponed—up to age 70—waiting to claim benefits can significantly boost lifetime retirement income.
