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20 States with Lowest Average Retirement Age in the US

This article takes a look at the 20 states with the lowest average retirement age in the US. If you wish to skip our detailed analysis on retiring early, you may go to 5 States with Lowest Average Retirement Age in the US.

On Retiring Early

Examining the March 2022 Current Population Survey by the U.S. Census Bureau reveals an important detail: Social Security is helping lift 15.4 million individuals aged 65 and above, out of poverty. However, given the shaky future of these funds, policymakers are adamant on pushing Social Security’s Full Retirement Age (FRA) to 70 and beyond. As per the proposal, individuals born in 1978 or later would experience a full retirement age of 70.

The retiring of the Baby Boomer generation is, in large part, to blame for this retirement crisis. With this generation leaving the workforce by the droves, both Social Security and Medicare are under immense stress. The simultaneous decrease in the workforce, coupled with an increased demand for healthcare and pension benefits, is further creating a precarious imbalance. As a result, policymakers face the daunting challenge of ensuring that these social safety nets remain sustainable, facing backlash in the process.

The US, however, isn't the only country that has been proposing to increase its retirement age. As of 2020, the average retirement age in the world was equal to 64.2 years for men and 63.4 years for women. According to the OECD, numerous developed countries with aging demographics are expected to witness a two-year rise in the average effective retirement age by the mid-2060s. Currently, the full retirement age in the USA is 67 for those born in 1960 and later. At this age, workers are entitled to receive 100% of the benefits that they have earned. However, provided the FRA is pushed to 70, new retirees will have their average lifetime benefits cut by nearly 20%.

Regardless, there are many people who choose to retire before the full retirement age. According to The Charles Schwab Corporation (NYSE:SCHW), the magic number needed to last a comfortable retirement is $1.8 million. However, Credit Karma notes that 27% of seniors aged 59 or older have no retirement savings at all. Having zero savings is a major reason many retirees don’t wait until the full retirement age. A Schroders study backs up this claim, stating that 36% of those surveyed said that they'd need the money way before they turn 70. Unsurprisingly, 44% are also of the view that the funds won't last so it's better to grab what's left.

As such, retirees are witnessing a new strategy to work for themselves post-retirement. According to a study by T. Rowe Price Group, Inc. (NASDAQ:TROW), many retirees are choosing to work part-time as part of their transition strategy. This is, in fact, a brilliant money move baby boomers are making in retirement. The study reveals that 57% of retirees wish to continue working in some form after retirement, as opposed to the 43% who wish to stop working once and for all.

"Many retirees either choose to work or need work to be included in their retirement lifestyle. The decision can have many powerful positive effects, not least of which is financial well-being.”

- Judith Ward, CFP®, a thought leadership director at T. Rowe Price Group, Inc. (NASDAQ:TROW).

Rowe Price Group, Inc. (NASDAQ:TROW) also notes in their survey that out of those individuals who consider themselves retired, 20% work either full-time or part-time, and 7% are reportedly looking for work. However, The Charles Schwab Corporation (NYSE:SCHW) informs retirees that returning to work after retirement can temporarily reduce social security benefits and Medicare. The benefits are recalculated and credit is provided for the months in which the benefit wasn't received.

With the average retirement age in the US being 64 years, those retirees who think they’ve made a mistake by retiring early and settling for a smaller social security check, there is another way out. In such a case, individuals who have taken their benefits early at a reduced rate can pay back to the government and start later with a higher payout, notes The Charles Schwab Corporation (NYSE:SCHW).

While discussions on proposals to raise the retirement age persist, many seniors are still opting for early retirement due to insufficient savings, health concerns, and various other factors. On that note, let’s check out where retirees, on average, are retiring the earliest.

20 States with Lowest Average Retirement Age in the US
20 States with Lowest Average Retirement Age in the US

Sean Pavone/Shutterstock.com

Methodology

To compile the list of states with the lowest average retirement age in the US, we began by listing out all the states along with their average retirement ages. These ages have been sourced from Madison Trust. For each state, we have also discussed the average social security check that a retired individual receives, as well as the estimated annual cost of retirement. The former has been sourced from our list of the highest average social security payments, while the figures for the annual cost of retirement have been taken from GoBankingRates.

States have been ranked in descending order from the highest to the lowest average retirement age. For states with the same average retirement age, tie-breaking has been done based on the annual cost of retirement required in each state, with lower expenses being ranked higher on our list.

Here are the states with the lowest average retirement age in the US:

20. Maine

Average Retirement Age: 63

Average Social Security Check: $1,666

Estimated Annual Cost of Retirement: $73,247

In Maine, the average retirement age is 63 years. The state's retirement system is called Maine Public Employees Retirement System, or MainePERS. This standard retirement pension plan covers the majority of public employees in the state. As such, Maine isn't very tax-friendly to retire to. Social security benefits aren't taxed in the state. However, other forms of retirement income are subject to taxes as high as 7.15%.

19. Nevada

Average Retirement Age: 63

Average Social Security Check: $1,707

Estimated Annual Cost of Retirement: $63,791

Nevada is a very tax-friendly state to retire to. It doesn’t have an income tax, which is why retirees are exempt from taxes on retirement income at the state level. On average, individuals retire at the age of 63. There are three main retirement systems in the state, namely Public Employees’ Retirement System (PERS), Legislators’ Retirement System (LRS), and Judicial Retirement System (JRS). PERS covers all state employees except legislators and judicial employees. The latter are covered under LRS and JRS.

18. Arizona

Average Retirement Age: 63

Average Social Security Check: $1,802

Estimated Annual Cost of Retirement: $63,754

The average retirement age in Arizona is also 63. The state receives one of the highest average social security payments, which is $1,802. It is one of the most popular states to retire to. Social Security benefits aren’t taxed here, but other types of retirement income are taxed either in full or partially.

17. Delaware

Average Retirement Age: 63

Average Social Security Check: $1,901

Estimated Annual Cost of Retirement: $62,908

The tax-friendly state of Delaware doesn’t tax social security benefits. It is also one of the states with the lowest average retirement age in the US, which is 63 years. While Social Security benefits aren't taxed in the state, withdrawals from retirement accounts are partially taxed, and so is public and private pension income.

16. North Carolina

Average Retirement Age: 63

Average Social Security Check: $1,752

Estimated Annual Cost of Retirement: $57,764

The average retirement age by state is 63 years for North Carolina. North Carolina is a moderately tax-friendly state to retire to. While social security benefits aren’t taxed here, other forms of retirement income are taxed at the income tax rate of 4.99%. Sales and property taxes are moderate.

15. South Carolina

Average Retirement Age: 63

Average Social Security Check: $1,766

Estimated Annual Cost of Retirement: $55,575

One of the states with the lowest retirement age in the US is South Carolina. Similar to previous states on our list, the average retirement age in this state is 63 years. The state is tax-friendly toward retirees. Social security benefits aren’t taxed here. Plus, there is a $15,000 taxable income deduction for seniors receiving any other type of retirement income.

14. Indiana

Average Retirement Age: 63

Average Social Security Check: $1,822

Estimated Annual Cost of Retirement: $53,803

Indiana, a moderately tax-friendly state for retirement, exempts all Social Security benefits from taxation. Individuals in this state typically retire at the age of 63. Even though Social Security isn't taxed, retirement account withdrawals, as well as public and private pensions, are taxed in the state.

13. Ohio

Average Retirement Age: 63

Average Social Security Check: $1,731

Estimated Annual Cost of Retirement: $53,583

The average worker retires at the age of 63 in Ohio. The state is moderately tax-friendly. Social Security retirement benefits aren't taxed here. However, other forms of retirement income are treated as regular income, with credits available.

12. Missouri

Average Retirement Age: 63

Average Social Security Check: $1,727

Estimated Annual Cost of Retirement: $53,123

The average retirement age in Missouri also stands at 63 years. Starting in 2024, social security benefits as well as income from other sources will be exempt from taxation at the state level. The cost of living in this state is 11.7% lower than the US average, making it an affordable retirement destination.

11. Georgia

Average Retirement Age: 63

Average Social Security Check: $1,717

Estimated Annual Cost of Retirement: $51,965

Georgia is one of the most tax-friendly states to retire in the US. Moreover, it is one of the states with the lowest retirement age in 2023, at 63 years. The state provides a maximum deduction of $65,000 per person on all types of retirement income for anyone aged 65 or older.

10. Mississippi

Average Retirement Age: 63

Average Social Security Check: $1,635

Estimated Annual Cost of Retirement: $50,569

Mississippi is one of the best states to retire on social security because of its tax-friendliness and low cost of living. The average retirement age in the state is 63 years. Moreover, the cost of living is 13.3% lower than the national average. All forms of retirement income are exempt from taxation in this state.

9. New Mexico

Average Retirement Age: 62

Average Social Security Check: $1,665

Estimated Annual Cost of Retirement: $56,536

Another state with one of the lowest average retirement ages in the US is New Mexico. On average, individuals tend to retire at 62 in the state. All forms of retirement income, including social security, are taxed in the state. Seniors whose household income is below a certain limit are also provided a deduction.

8. Louisiana

Average Retirement Age: 62

Average Social Security Check: $1,659

Estimated Annual Cost of Retirement: $55,703

On average, people retire at the age of 62 in Louisiana, receiving a monthly average check of $1,659. Overall, it is considered a tax-friendly state to retire to. Social security benefits and income from public pensions aren't taxed in this state. However, income from retirement savings accounts is taxed.

7. Michigan

Average Retirement Age: 62

Average Social Security Check: $1,858

Estimated Annual Cost of Retirement: $54,650

Michigan also makes it to our list of states with the lowest average retirement age in the US. The average retirement age in this state is 62 years. The state is considered tax-friendly as social security benefits aren't taxed. Moreover, deductions are provided for other types of retirement income.

6. Kentucky

Average Retirement Age: 62

Average Social Security Check: $1,680

Estimated Annual Cost of Retirement: $52,536

In the state of Kentucky, the average retirement age stands at 62 years. There are no taxes on Social Security benefits in this state. However, other types of retirement income are taxed with significant deductions for seniors.

Click to continue reading and see the 5 States with Lowest Average Retirement Age in the US.

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Disclosure: none. 20 States with Lowest Average Retirement Age in the US is originally published on Insider Monkey.

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