Finance


U.S. seniors make just 57% of average income of 45 to 64 year olds

Conventional wisdom states that retirees need 70% of the annual income that they earned during their working years. Interest.com put this theory to the test in an analysis of Census data. Nationally, the average income for those who are 65 and older equals just 57% of the average income for 45 to 64 year-olds. The study revealed that senior citizens in 48 of the 50 states (plus the District of Columbia) are falling short. Nevada (71%) and Hawaii (70%) are the only states to reach the coveted 70% threshold. Seniors in Massachusetts face the largest income gap in the country; as a group, they are only replacing 45% of younger adults’ incomes.

Interest.com examined the U.S. Census Bureau's 2011 "American Community Survey” (the most recent edition). For each state and the District of Columbia, Interest.com divided the median annual household income for those who are 65 and older by the median annual household income for those between 45 and 64 years old. The Census Bureau broadly defines income to include wages, salaries, tips, social security, welfare, interest, dividends, pensions, income from defined contribution retirement plans (such as 401(k)s and IRAs), rental properties, royalties and other sources.

Those who are 65 and older are able to replace at least 60% of their younger counterparts’ annual incomes in 19 states and the District of Columbia. Arizona (68%), New Mexico (67%) and Florida (67%) join Nevada and Hawaii in the top five.

In the 4 lowest-ranking states – New Jersey (50%), Rhode Island (48%), North Dakota (48%) and Massachusetts (45%) – people age 65 and older are unable to replace even 50% of their younger cohort’s incomes.

The fact that Social Security is the primary source of income for a majority of retired Americans – not pensions or retirement savings – explains why so many seniors have so little money. The average Social Security payment for a retired worker at the start of 2012 was only $1,230 a month ($14,760 a year).

“People who live in a given area are competing with each other for the same goods and services, including housing, cars and groceries,” said Mike Sante, managing editor of Interest.com, in a prepared statement. “This is why we thought it would be useful to compare younger and older adults’ incomes in each state. We found that many senior citizens are significantly underfunded and risk running out of money, especially since people are living longer than they used to and may need to support a two- or three-decade retirement.”

STATE RANK REPLACEMENT INCOME MEDIAN INCOME
45 to 64
MEDIAN INCOME
65 and over
Alabama 9 63.4% $49,379 $31,324
Alaska 14 62.5% $76,379 $47,761
Arizona 3 68.1% $55,187 $37,581
Arkansas 7 65.7% $46,077 $30,259
California 24 58.9% $69,251 $40,815
Colorado 33 56.5% $68,098 $38,480
Connecticut 46 50.9% $82,223 $41,843
DC 11 63.0% $67,311 $42,396
Delaware 15 62.5% $69,947 $43,687
Florida 5 66.9% $52,183 $34,892
Georgia 17 62.0% $54,451 $33,761
Hawaii 2 70.1% $73,310 $51,361
Idaho 16 62.3% $53,091 $33,100
Illinois 39 54.4% $65,074 $35,370
Indiana 25 58.3% $56,112 $32,714
Iowa 40 52.7% $62,100 $32,757
Kansas 32 56.6% $61,564 $34,831
Kentucky 27 58.2% $50,180 $29,181
Louisiana 22 59.9% $49,610 $29,716
Maine 38 54.8% $55,982 $30,691
Maryland 36 54.9% $85,070 $46,683
Massachusetts 51 45.2% $78,483 $35,483
Michigan 23 59.6% $56,503 $33,688
Minnesota 45 51.2% $69,974 $35,823
Mississippi 18 61.4% $44,332 $27,203
Missouri 19 60.3% $54,714 $32,977
Montana 8 64.5% $51,568 $33,247
Nebraska 34 56.3% $62,148 $35,006
Nevada 1 70.7% $55,401 $39,181
New Hampshire 47 50.7% $75,582 $38,296
New Jersey 48 49.5% $82,477 $40,850
New Mexico 4 66.9% $51,811 $34,657
New York 42 52.5% $66,589 $34,946
North Carolina 13 62.9% $52,345 $32,936
North Dakota 50 48.2% $65,902 $31,743
Ohio 26 58.2% $56,187 $32,683
Oklahoma 20 60.0% $52,526 $31,537
Oregon 12 63.0% $57,411 $36,160
Pennsylvania 43 52.2% $61,534 $32,124
Rhode Island 49 48.2% $68,198 $32,874
South Carolina 6 66.3% $50,054 $33,171
South Dakota 37 54.9% $59,829 $32,823
Tennessee 21 60.0% $50,350 $30,186
Texas 28 58.1% $60,132 $34,963
Utah 30 57.3% $69,618 $39,886
Vermont 29 57.8% $63,370 $36,600
Virginia 35 56.2% $74,670 $41,965
Washington 31 57.1% $69,803 $39,829
West Virginia 10 63.0% $45,019 $28,375
Wisconsin 41 52.6% $62,214 $32,739
Wyoming 44 51.2% $67,295 $34,487
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