Everyone wants to know the magic number you need to save for retirement.

But does where you live have an impact on your retirement savings?

We set out to answer this question by looking at the average retirement savings of the millions of people who use the Empower Personal Dashboard™. This allowed us to assess how much people had in their retirement nest eggs, broken down by age, generation and state.

Let’s dive in.

The average retirement savings by state

Anonymized user data from the Empower Personal Dashboard™ as of 9/29/2021.

There are a few specific regions that seem to stand out the most in terms of top ranking. If you compare East Coast versus West Coast, it’s clear East Coasters are tucking away more in their retirement nest eggs. Connecticut leads this year’s top 5 list with an average retirement savings of $545,754. Fellow East Coast states also included in the top 5 are: New Jersey (2nd – $514,245), New Hampshire (3rd– $$512,781), and Vermont (5th – $494,569).

The lone state representing the west region in the top 5, Alaska ranks fourth with an average balance of $503,822.

As far as the bottom of the list goes, the states are Utah (1st bottom – $315,160), North Dakota (2nd bottom – $319,609), Washington D.C. (3rd bottom – $347,582), Oklahoma (4th bottom – $361,366) and Mississippi (5th bottom – $347,884).

Why some states rank higher

There are several factors at play when looking at retirement savings averages. It should be noted that only looking at the state-by-state breakdown may be unfair when you think of different tax burdens and cost-of-living metrics that vary between states.

In our analysis, we did not look specifically into these other factors as a leading cause. In our assumption, it likely makes sense why states such as Alaska are included in the top five list, especially since Alaska is a state known for favorable tax laws compared to states such as California.¹

High cost of living could also be a factor for certain states not making the top five. That is likely the reason for Hawaii, District of Columbia and New York, to name a few, as cities in those states top the highest cost of living, according to The U.S. Bureau of Labor Statistics.²

According to this 2021 ranking, here are the top five states with the highest cost of living: Hawaii, California, New York, Oregon and Massachusetts.³

According to a recent report from Statista, New Jersey is known for having the highest ratio of millionaire households per capita in the country (9.76%).⁴ So it’s no question it is included in the top five for highest average retirement balances. 

Alaska is one of the most tax-friendly states in the country, including no state income tax and no state sales tax. Ranked second on our list for highest average retirement balances, New Hampshire also carries several tax-friendly benefits. Residents don’t have to pay state income tax on Social Security benefits, pensions, distributions from retirement accounts, or income from a classified retirement job.

How much do you need to retire comfortably in each state?

There’s no one answer to how much you will need to retire comfortably, no matter what state you live in. But there are a few common methods to help you determine what you might need to support your desired retirement lifestyle.

One thing to consider when determining how much you’ll need to retire is your state’s tax burden. There are several types of taxation that vary by state and that could really impact your ability to sustain your desired lifestyle. Some of these include property tax, income tax and inheritance tax. For example, if an expected inheritance is part of your retirement plan, you should know if your state has estate or inheritance taxes.

There are various methods of calculating how much you might need to spend or withdraw from your portfolio.

A common one is the “4% rule.” If you follow this rule, you withdraw 4% of your portfolio in the first year of retirement and then you annually withdraw that same dollar amount, adjusted for inflation, for the next 30 years. The idea is that if you follow this rule, you minimize your chances of running out of money in retirement.

While this rule is a good starting point, it has been hotly debated since it was established. Some argue that it is too conservative. Others argue that low-interest environments and longer life expectancies make it too risky. Meanwhile, your financial future hangs in the balance. If the rule is too conservative, then you’ve unnecessarily constrained your retirement lifestyle. If the rule is too risky, you could run out of money just when you need it most.

By generation breakdown

In addition to the average retirement balances for each state, you may be curious how your retirement balance compares with the average balance for each of the different generations. As you look at the table below, it is important to keep in mind that everyone’s financial goals and plans differ. Consider focusing on controlling the controllable and developing a plan that fits your long-term strategy.

Data from Empower Personal Dashboard™ as of 9/29/21.