With nearly 10,000 baby boomers reaching age 65 every day,
there is an increasing need in America to talk about how to prepare for a
secure and comfortable retirement. While retirement-related issues have the
attention of people from all walks of life – employers, workers, policymakers,
community leaders and, of course, financial advisors – there is a tendency to
reduce the issues associated with retirement to narrow silos, such as household
savings, personal health and quality of life.
Instead, we should be thinking about retirement more
holistically, and bring each consideration into the discussion around how to
reach the best retirement outcome. As
people near retirement age, they are not thinking about just one facet of their
retirement, they are thinking about the overall life experience that they want
to build for themselves, which includes finances as well as their health,
community connections, access to leisure and recreation and numerous other
factors. Each factor determines how much they should save, when they should start
and how they can be best positioned to enjoy that stage of their life.
Understanding that different things matter to different
people in their retirement, and that each state has its own set of unique
retirement conditions, LPL Financial’s Research group evaluated each state for
how it is doing in creating the conditions often considered to contribute to a
successful retirement. The recently published first-annual Retirement Index
provides a holistic look at each of the 50 states and the District of Columbia
to assess how they fare across a range of metrics pertaining to the
pre-retirement age group, those 45-64, the age group that is most likely
thinking about, if not actively planning for retirement. The index evaluates
personal finances, health care, employment and education, wellness and housing.
The index is a broad tool that can be applied to anyone, at
any stage, thinking about retirement. It opens the dialogue between Americans
and financial advisors to consider what the environment looks like based on the
things that are most important to them – be it positioning themselves early on
with a job that will let them maximize savings or understanding that their
healthcare costs may be higher than average based on their residence. The index
can jumpstart an individual’s thinking about expectations for his or her
version of an ideal retirement, and then helps them approach their work with an
advisor as a collaborative process that allows them to create a plan that will
help them to work toward that ideal retirement outcome.
The Complexity of the
Retirement Landscape
The findings from this year’s study reinforce the complexity
of the retirement landscape, as it reveals that every state has its strengths
and weaknesses. For example, Virginia ranked No. 1 driven by strong metrics for
its residents’ financial wellbeing, as measured by key indicators including
cost of living, median household income and private sector retirement assets.
Virginia also performs well on certain quality of life measures including relatively
low crime rates, manageable commutes and mild weather. Yet, even this
top-ranked state has its challenges, with relatively high housing and health
care costs.
At the same time, even some of the lowest ranking states in
the survey, such as New York and New Jersey, which were weighed down by very
high housing costs and cost of living, had certain clear strengths, such as
strong health care systems and good employment opportunities.
Moreover, states that are often synonymous in the public’s
mind with comfortable retirement, including Florida and Arizona, actually
ranked relatively low in the index due to these state’s economic challenges,
which may be a lingering effect of the housing downturn.
These findings have important implications for individuals,
retirement planning professionals and the states alike. For the individual
looking ahead to retirement, it is critical that he or she take a step back and
look at the full range of issues that will impact a post-retirement life and
lifestyle. This means more than just having a strong financial plan in place –
although that is certainly crucial. It means identifying individual goals and
needs for the long-term and making choices about work, housing and even the
community in which he or she chooses to live in. Today’s financial advisors are
increasingly dedicated to that kind of goal-oriented planning and people may
benefit greatly from that kind of professional guidance.
At the state level, this survey should be seen as a call to
action. Every state in the country has areas that could be improved to create a
truly robust retirement environment for the tens of millions of Americans who
will retire in the coming years. Doing so requires taking a comprehensive view
of the issues ranging from tax policy to health care to housing.
Retirement is going to be an even more important issue as
Americans are assuming more of the responsibility in preparing for that stage
of their life. And while this index helps highlight key aspects that affect
retirement in each state, it is one of many tools available to those who are
planning their retirement. Working with a trusted financial advisor can provide
valuable insights and provide a more objective view of the landscape
ahead. Understanding the big picture –
from where to live to how you save and invest – and then planning for a
specific goal can contribute to better outcomes for the millions of Americans
who will are planning for the golden years of their lives.
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