A retirement crisis is quietly unfolding across America. According to a new analysis from Northwestern Mutual and Seniorly, retirees in 41 states plus Washington D.C. are projected to outlive their savings, facing an average shortfall of $115,000 during their golden years.
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The findings paint a sobering picture of retirement readiness in the United States, where rising costs of living, healthcare expenses, questionable policy choices and longer lifespans are colliding with inadequate savings to create financial stress for millions of older Americans.
Only nine states provide seniors with enough financial cushion to fully cover their retirement costs. For everyone else, the math simply doesn’t work.
The $115,000 Retirement Gap Facing Most Americans
The study examined the financial outlook for retirees by comparing projected retirement income (think: Social Security, savings and investments) against expected living expenses over typical retirement lifespans in each state.
The results are eye-opening: Most American retirees will face significant financial shortfalls that could force difficult choices about housing, healthcare and quality of life in their later years.
This retirement funding crisis comes as more than half of Generation X and 40% of baby boomers already expect to outlive their savings. The “magic number” Americans think they need for retirement has now reached $1.26 million, yet even that amount may not provide security in many high-cost states.
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The States Where Retirement Dreams Become Financial Nightmares
New York leads the nation in retirement financial stress, with seniors facing a devastating $448,000 gap between their needs and resources. Despite the state’s higher incomes, retirees require approximately $1.12 million to cover 19.4 years of expected retirement expenses but can only expect to collect around $670,000 from all income sources.
Hawaii ranks as the second-worst state for retirement security, with seniors facing a $417,000 shortfall. The state’s astronomical living costs — requiring $1.74 million for a typical retirement — far exceed what most retirees can accumulate, even with Hawaii having the highest average retirement income in the nation at $1.32 million.
Washington D.C. completes the top three worst, where retirees face a $407,000 gap between retirement needs and available resources. The nation’s capital combines high living costs with extended life expectancy to create particularly challenging financial conditions for older residents.
Other states where retirees face significant financial challenges include Alaska and California, both struggling with expensive housing markets and elevated healthcare costs that drain retirement savings faster than anticipated.
Here’s the full list in ranked order:
- New York
- Hawaii
- Washington, DC
- Alaska
- California
- Massachusetts
- Rhode Island
- Vermont
- Louisiana
- Connecticut
- Arkansas
- Mississippi
- Arizona
- New Hampshire
- Florida
- Alabama
- West Virginig
- Nevada
- Ohio
- Wisconsin
- South Dakota
- New Meixco
- Kentucky
- Texas
- Oregon
- Delaware
- Oklahoma
- Pennsylvania
- Missouri
- Idaho
- Tennessee
- Illinois
- Wyoming
- Virginia
- New Jersey
- North Dakota
- Georgia
- North Carolina
- Michigan
- Nebraksa
- Maine
- Indiana
The 9 States Where Retirees Can Actually Retire Comfortably
It’s not all doom and gloom, though. In fact, there are nine states where financial security during your golden years is more feasible.
Washington state tops the list for retirement financial security, providing seniors with an average $146,000 cushion above their expected needs. This success stems from combining high retirement incomes (approximately $1.13 million) with living costs that remain manageable compared to other high-earning states.
Utah ranks second, offering retirees a $121,000 financial buffer through strong incomes around $994,000 paired with moderate living expenses of $873,000. This combination means Utah retirees can live comfortably without constant financial stress.
Montana, Colorado and Iowa round out the top five states for retirement security, each providing smaller but meaningful financial surpluses ranging from $32,000 to $43,000. Once again, it’s all about a moderate cost of living to make those retirement dollars stretch.
Here’s the full list in ranked order:
- Washington
- Utah
- Montana
- Colorado
- Iowa
- Minnesota
- Maryland
- Kansas
- South Carolina
Why High-Income States Often Have the Worst Retirement Outcomes
Some of the wealthiest states create the most challenging retirement conditions. It all comes down to, you guessed it, cost of living.
Massachusetts, despite providing retirees with over $1 million in average retirement income, still has cost of living expenses exceeding $1.31 million. California presents similar challenges, with retirement costs around $1.26 million straining even well-funded retirement accounts.
The lesson is: A million-dollar retirement fund can mean very different things based on location.
The Longevity Factor: Living Longer Means Needing More Money
Living longer actually makes retirement harder to afford. In Hawaii, people typically live 20.6 years after retiring at 65, which is wonderful but also means an almost five extra years of expenses compared to other states.
Compare that to West Virginia and Mississippi, where people only live about 16.1 years in retirement on average. The shorter timespan means retirement money doesn’t have to stretch as far, so the financial math works out better. Sadly, many of the people in those states aren’t living shorter retirements by choice. They’re dealing with serious health problems and economic issues that cut their lives short.
This creates a strange situation where staying healthy and living longer (which is obviously good) actually makes retirement planning more expensive and complicated.
The Hidden Retirement Costs Driving Financial Shortfalls
Healthcare expenses represent a major factor driving retirement shortfalls across states. Medical costs have risen faster than inflation, creating unexpected drains on retirement savings even for well-prepared seniors.
Housing costs also play an important role, particularly in states like California, New York and Hawaii where property values and rental costs consume disproportionate shares of retirement incomes.
Transportation, food and other essential expenses have similarly outpaced the growth of typical retirement incomes, which of course puts pressure on budgets.
Strategies for Overcoming Retirement Shortfalls
If you’re worried about running out of money in retirement, financial experts have some game plans that actually work:
Time your Social Security right. When you claim Social Security matters way more than most people realize. Claiming later versus early can literally mean hundreds of thousands of extra dollars over your lifetime.
Move somewhere cheaper. This might sound obvious but relocating from an expensive state to an affordable one can add years to how long your money lasts.
Prepare for medical bills. Healthcare costs in retirement can be brutal and unpredictable. Setting up health savings accounts now, buying long-term care insurance and understanding Medicare supplements can prevent medical expenses from wiping out your savings later.
Work a few extra years if you can. Every additional year you work does double duty. You’re earning more money while not spending your retirement savings. It’s like getting paid twice for the same time period.
Be smart about taxes. Where you keep your retirement money and how you withdraw it can save or cost you thousands in taxes. Working with a financial expert can help to ensure you’ve got these basics covered.
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This article originally appeared on GOBankingRates.com: 41 States Where Retirees Are Expected To Run Out of Money in Retirement
