The States with the Lowest Average Retirement Ages
Based on recent studies analyzing data from sources like the U.S. Census Bureau, the distinction of having the lowest average retirement age is shared by two states. As of recent analyses, both Alaska and West Virginia have an average retirement age of 61. While other rankings may show slight variations based on the data set, these two states consistently rank among those with the earliest average retirement.
It is important to understand that these are averages, and individual retirement ages within these states can vary widely. The factors influencing an earlier exit from the workforce in these regions are diverse and offer valuable insights for anyone considering their own retirement timeline.
Key Factors Influencing Early Retirement by State
Several macroeconomic and social factors contribute to the wide variation in average retirement ages across the country. The decision to retire is rarely based on a single factor and is often influenced by a complex interplay of personal circumstances and state-level conditions.
Economic and Cost-of-Living Differences
- Cost of Living: A primary driver of retirement age is the cost of living. In states with lower expenses, residents often find their retirement savings stretch further, enabling them to leave the workforce earlier. Both West Virginia and Mississippi, which often feature on lists of early retirement states, have relatively low living costs.
- Income and Savings Levels: While low living costs are a plus, some states with lower incomes may still have challenges. However, a state's economic structure can favor earlier retirement. For example, some states with a history of strong public or union-backed pension systems allow workers to retire with a secure income stream before relying on Social Security.
Workforce Demographics and Industries
- Physically Demanding Jobs: States with economies heavily dependent on physically demanding industries, such as mining, manufacturing, or fishing, often have earlier average retirement ages. The strain of these jobs can lead workers to exit the workforce sooner. This is a significant factor in states like West Virginia (mining) and Alaska (fishing, oil).
- Job Market Dynamics: State-specific job market trends, including rates of long-term unemployment among older workers, can also impact retirement timing. In areas with fewer employment opportunities for those in their late 50s and 60s, some workers may be forced into earlier, and possibly unplanned, retirement.
State Tax Policies
- Tax-Friendliness for Retirees: Some states offer more favorable tax environments for retirees by exempting Social Security benefits, pension income, or other retirement distributions from state income tax. This can make a state a more affordable retirement destination and facilitate earlier retirement for those with sufficient savings.
Case Study: Alaska and West Virginia
Let’s examine the specific circumstances in the two states with the lowest average retirement ages.
Alaska:
- The economy is heavily influenced by natural resources, particularly oil and fishing, which are physically taxing industries. Long-term work in these fields can lead to earlier retirement due to physical wear and tear.
- The state has unique financial factors, including the Alaska Permanent Fund, which provides residents with annual dividends. While not a retirement plan, it contributes to overall resident wealth and potentially earlier financial independence.
West Virginia:
- Historically a hub for coal mining, many long-time residents have worked in physically strenuous jobs. Pension plans in this and related industries have long supported earlier retirement.
- The state boasts one of the lowest costs of living in the U.S., making it possible for retirement savings to go much further than in more expensive regions.
How Your Location Affects Your Retirement Timeline
Your geographic location has a tangible impact on your retirement viability. The combination of average wages, cost of living, and tax laws determines the savings timeline needed to achieve financial freedom. As researchers at the Center for Retirement Research at Boston College have found, households in high-cost areas face challenges in saving enough, leading to longer working lives. How Does Local Cost-of-Living Affect Retirement?
Comparison Table: States with Early vs. Late Retirement
| Feature | West Virginia (Early Retirement) | Massachusetts (Later Retirement) |
|---|---|---|
| Average Retirement Age | ~61 | ~65 |
| Cost of Living Index | Below national average | Significantly above national average |
| Dominant Industries | Mining, Manufacturing, Agriculture | Healthcare, Technology, Education |
| Tax-Friendliness | Social Security exempt, relatively low property taxes | Higher income taxes, including on some retirement income |
| Workforce Type | Higher proportion of physically demanding jobs | Higher proportion of service and professional jobs |
Planning for an Earlier Retirement: Actionable Steps
If you are aiming to retire earlier than the national average, here are some strategies you can implement:
- Maximize Savings Early: Start saving aggressively as soon as possible. The power of compound interest is a powerful tool for accelerating your financial readiness.
- Reduce Debt: Minimize high-interest debt, such as credit card balances. Entering retirement debt-free is a significant advantage.
- Consider Location: Evaluate the potential impact of relocating to a state with a lower cost of living or more favorable tax policies. This can help your savings last longer.
- Explore Investment Options: Go beyond employer-sponsored retirement plans. Look into IRAs, taxable brokerage accounts, and other investment vehicles to build a diverse portfolio.
- Create a Detailed Budget: Understand your expenses thoroughly. A clear picture of your spending will help you determine how much you truly need to save for retirement.
Non-Financial Factors in Retirement Timing
- Health and Wellness: Physical and mental health play a crucial role. Health challenges can force an earlier retirement or require more savings to cover medical expenses.
- Job Satisfaction: A love for your work might motivate you to stay employed longer, while job dissatisfaction can be a driving force toward an earlier retirement.
- Caregiving Responsibilities: The need to care for an aging parent or a spouse can necessitate an earlier departure from the workforce.
- Unexpected Job Loss: Despite the best-laid plans, job loss in one's later career can unexpectedly push someone into early retirement, particularly if the job market is tight.
Conclusion: Retirement is a Personal Equation
While knowing which state has the lowest retirement age provides interesting data, remember that retirement is not a one-size-fits-all experience. The average retirement age in a state is the product of many local economic and social conditions. For your own planning, these state-level trends offer a valuable framework for understanding the factors at play. By considering your personal finances, health, and location, you can build a strategy that helps you retire on your own terms, whether that's early or later.
