In the aftermath of a recession that wiped out 8 million jobs and crippled even more portfolios, Americans are still struggling to rebuild their nest eggs. So far, the results have been far from encouraging, and a quick glance at the economy and financial markets reveals a host of factors holding Americans back from their retirement goals. The housing market, for instance, is still weak, a persistent unemployment rate continues to stand in the way of a sustainable recovery, and many Americans' long-term investments are back to where they were a decade ago.
[See U.S. News's list of The 100 Best Mutual Funds for the Long Term, and use our Mutual Fund Score to find the best investments for you.]
A number of recent studies confirm the bleak outlook. For example, one survey, conducted by the human resources consulting firm Hewitt Associates, found that only 18 percent of employees who have jobs (that they anticipate holding onto for the rest of their careers) at large U.S. companies and contribute to a defined contribution plan will be financially prepared for retirement. For its part, the Employment Benefit Research Institute revealed that 43 percent of Americans report having less than $10,000 stashed away for retirement. Worker confidence has also taken a hit: Insurance provider MetLife says that just 35 percent of workers who are between 45 and 49 years old report feeling ready for retirement.
[See Slideshow: The Best—and Worst—Places to Build a Nest Egg.]
Still, even as workers throughout the country struggle to regain their footing, it's clear that not all states are created equal. With that in mind, U.S. News created an index to measure which states are the best for Americans who are saving for retirement. We've looked at each state's housing market, unemployment rate, per capita income, and taxes to get a sense of where Americans are most likely to be able to tuck away money for their nest eggs.
All state-by-state income figures are from 2010. The numbers are nominal, meaning that they're not adjusted for inflation. Tax burdens are from a 2008 study by the Tax Foundation. Unemployment rates are from June 2010. What follows is a list of the five best—and five worst—performers. The highest possible score that a state can earn is 42 points.
[See a full list of states and how they perform in each category.]
The best states:
Wyoming (Score: 40). Wyoming's loose tax code helped propel it to the front of the pack. Notably, residents don't pay taxes on wages or on capital gains. Both of these exemptions allow workers to save noticeably more of their earnings—both from investments and jobs—for use in retirement. What's more, even before the tax breaks, Wyoming residents have well-above-average incomes. In 2010, the state's per capita income is $45,584. Only five states and the District of Columbia have higher incomes. Wyoming's 6.8 percent unemployment rate is also well below the national average. Meanwhile, home prices there are expected to grow by 4.5 percent annually between 2010 and 2013, according to Moody's Analytics. Since many Americans choose to sell their homes to downsize before retirement, price appreciation helps them grow the size of their next eggs.
New Hampshire (Score: 39). New Hampshire's unemployment rate, which is currently 5.9 percent, is the country's fourth lowest. Meanwhile, the state's state and local tax burden, expressed in terms of taxes as a percentage of income, is just 7.6 percent. Only four states sport better numbers in that category. All told, the Granite State performs well across all categories, but its housing market keeps it out of first place. Between 2010 and 2013, home prices there are expected to appreciate by 1.1 percent per year, according to Moody's Analytics. While that's still a healthy amount, it's not good enough to catch Wyoming.
Alaska (Score: 38). Taxes also figure prominently into the equation in Alaska. Like Wyoming, the state has no taxes on wages or capital gains. The state's state and local tax burden, expressed in terms of taxes as a percentage of income, is just 6.4 percent. Nationally, that figure is 9.7 percent. Meanwhile, Alaskan real estate is also a good investment: Between 2010 and 2013, home prices there are expected to grow by 3.5 percent per year, according to Moody's Analytics. The state's per capita income, which is $43,369, is also healthy.
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Don of PA 7:59AM May 09, 2013
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e of NH 10:34AM January 05, 2012