Best States To Save For Retirement

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Wednesday, September 29, 2021 | views Last Updated 2021-09-29T21:24:09Z

The path to a successful retirement is the same for most: Save a good chunk of your pay in a 401(k) or individual retirement account (IRA), work until you’ve amassed your nest egg and don’t take on more debt than you can handle.

Where you live dictates how precarious your journey may be, however. That’s why Forbes Advisor set out to select the best states to save for retirement: You need to know what you’re up against.

To determine our list, we analyzed eight different categories of data that directly impact people’s ability to save for retirement: participation rate in employer-sponsored plans, household income, tax burden, cost of living, home value, historic home appreciation rates, historic unemployment rates and the amount people currently have in retirement accounts.

Some of the winners may surprise you, but a theme for most in our top five is balance; you want to live in an area with good job prospects, appreciating home value, but that’s not so expensive that you’re spinning your wheels.

With that in mind, these are the best states to save for retirement.

Best States To Save For Retirement

1.  New Hampshire

Employer retirement plan participation: 6th (tie) ● Income: 8th ● Tax burden: 23rd (tie) ● Cost of living: 37th ● Home value: 14th ● Home value gains: 16th ● Unemployment rate: 6th (tie) ● Retirement savings: 2nd

The Granite state came in first in our rankings, even though it only ranked in the top five states for one category we examined: amount of current retirement savings. That’s because it performed well in many categories without bombing in the others; you can earn a decent living without being taxed to death and enjoy a healthy housing market. It only finished in the bottom half of one category: cost of living. Combined, all of these make New Hampshire an excellent place to put more of your money toward retirement.

2.  Washington

Employer retirement plan participation: 8th (tie) ● Income: 7th ● Tax burden: 24th ● Cost of living: 38th ● Home value: 3rd ● Home value gains: 5th ● Unemployment rate: 35th (tie) ● Retirement savings: 9th

The Evergreen state rose to second place thanks in large part to its housing prices. Not only were home values the third highest, but it was also the fifth fastest growing state for property gains over the past decade. That combination means future retirees can build up equity in their home more quickly than in other states, giving you a flexible asset to use in retirement, whether empty-nesters want to downsize and add the difference to their nest egg, or tap their equity through a HELOC or even a reverse mortgage. Washingtonians face a looser labor market than other states in our top five and a decently high cost of living, thanks in part to high home costs. You can’t have everything in life, and those factors conspired to keep the state from a first-place finish.

3.  North Dakota

Employer retirement plan participation: 3rd (tie) ● Income: 20th ● Tax burden: 9th (tie) ● Cost of living: 24th ● Home value: 29th ● Home value gains: 32nd ● Unemployment rate: 1st (tie) ● Retirement savings: 49th

The Flickertail state’s strength came in three areas: unemployment rate, percentage of those participating in employer retirement plans and tax burden. Step back and that’s a pretty good combination for its residents! Steady job prospects allow you to save in your 401(k) while low taxes free up extra money for other aims. Home prices and gains were middle of the pack, but, unfortunately, its residents have next to the lowest amount saved, according to Personal Capital’s data.

4.  South Dakota

Employer retirement plan participation: 8th (tie) ● Income: 21st ● Tax burden: 14th ● Cost of living: 26th ● Home value: 31st ● Home value gains: 25th (tie) ● Unemployment rate: 3rd (tie) ● Retirement savings: 19th

The Mount Rushmore state, like New Hampshire, had no glaring weakness, scoring well across the board. While you’ll find higher-paying jobs and a more robust home market elsewhere, South Dakotans can expect steady job prospects, a low tax burden and a moderate cost of living. (A good combination for saving money!) It’s just that its consistent scores were a tad lower than New Hampshire’s.

5.  Colorado

Employer retirement plan participation: 27th (tie) ● Income: 11th ● Tax burden: 17th ● Cost of living: 35th ● Home value: 5th ● Home value gains: 7th ● Unemployment rate: 11th (tie) ● Retirement savings: 21st

Residents of the Centennial state might feel at home in Lake Wobegon: They’re practically above average in everything. You’ll be able to earn a decent income in a healthy labor market, save more of it thanks to a low tax burden, all while enjoying the fruits of a hot housing market. Participation rates in employer-sponsored plans, though, are more pedestrian and the only real negative is cost of living, though it’s not as bad as in Washington. Again, balance in all things is key for retirement savings, and Colorado’s retirement savings equilibrium simply trailed our leaders.

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