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Retirement saving is a hot topic right now. The steep rises in living costs have made it harder than ever to put cash aside for old age. As a result, the Federal Reserve estimates that just 54.3% of people have retirement accounts.
Individual retirement accounts (IRAs) can be an excellent tax-advantaged way to save for retirement, but they are only part of the picture. Many people also put money into their workplace 401(k)s and other retirement accounts.
If you're mapping out your retirement, it's important to think about what account will work best for you. You can open an IRA at most top stock brokers .
Here's how much people have in their IRAs
We used the latest Census Bureau data to view the top five states in terms of IRA savings. We've used the median IRA values because mean averages can be skewed by extremes at either end. We left out the states where there wasn't enough data to give accurate figures.
On average Americans have $53,000 in their IRAs and Keogh Plans, according to the Census Bureau. Keogh Plans are a bit like 401(k)s for self-employed people, but they aren't super common. These five states are way ahead of the average.
1. Kansas: $120,000
Compared with other parts of the U.S., people living in Kansas have a relatively low cost of living, affordable housing, and carry less debt. That's why Forbes ranks Kansas highly for ease of saving money.
Kansas may top the bill in terms of IRAs, but people living in the Sunflower State haven't stashed as much into their 401(k)s. The data shows the median value of 401(k)s in the state is $50,000. Overall, people have $128,000 in retirement savings.
2. New Jersey: $100,000
New Jersey ranks highly for retirement savings in all forms -- residents also have $80,000 in their 401(k)s. This is important because New Jersey has a pretty high cost of living. According to the Missouri Economic Research and Information Center, New Jersey is the 11th most expensive state, factoring in groceries, housing, transport, utilities, and health.
3. Connecticut: $99,000
Like New Jersey, Connecticut is an expensive state for retirees. A study by 24-7 Wall Street estimates the average 65-year-old will spend about $1.237 million in retirement. Connecticut residents also have a median of $75,000 in their 401(k)s.
4. Oregon: $94,200
In 2017, Oregon became the first state to introduce an auto-IRA program. If a company does not have a retirement program, workers are automatically enrolled in a state-run IRA plan called OregonSaves. Unless they opt out, a percentage of their paycheck is sent to the retirement fund. On average, participants are contributing $178 a month to their state IRAs.
5. Nebraska: $80,000
Nebraska is a popular place to retire, in part because of its relatively low living and health costs. The state also has a number of services targeted at retirees and the state does not tax Social Security benefits. Overall, Nebraskans have $66,300 in median retirement savings.
Ways to boost your retirement savings
It's interesting to play with statistics, but the numbers above only tell us so much. If a 35-year-old has, say, $120,000 in their retirement account, they'd be in a very different position from a 55-year-old with the same amount.
If your retirement funds are not where you want them to be, here are some steps you can take.
1. Plan based on your situation
Consider the type of lifestyle you want in retirement and try to estimate how much it might cost. Use your current budget as a guideline. Once you know how much you might need each month, you can work backward to put a dollar amount on your retirement target. Retirement calculators can help here.
There will be areas (such as transportation) where you may spend less if you're not commuting to work. You may have paid down your mortgage, which will impact your housing costs. Some costs, such as healthcare, will likely be higher. Factor in other income sources such as Social Security.
2. Make the most of tax-advantaged accounts
The government wants you to save for your old age. Research the ways you can reduce your tax bill by putting money into tax-advantaged retirement accounts.
That includes maxing out your IRA contributions, understanding health savings accounts, and potentially contributing to your work 401(k). If you are over 50, you can make catch-up contributions, as well.
3. Adjust your spending today
The most important thing to do if your retirement savings aren't on track is to see how you can squeeze more money out of your budget to put into your investment accounts. If you don't have a budget, sit down and look through your recent bank statements or use a budgeting app to break down your spending.
Look for non-essential spending you can cut. It might be some subscriptions you barely use, eating out less, or shaving 10% off your grocery costs. Set yourself an achievable goal and make regular transfers into your investment accounts.
The sooner you start saving for retirement, the better
Many of us are not where we'd like to be in terms of retirement savings. There are often so many immediate demands on our budgets that it's hard to put money aside for the future. However, the earlier you can build your retirement savings, the longer compound interest can work in your favor.
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