A report from LPL Financial ranks all 50 states and Washington, D.C., on their relative “retirement desirability,” finding some surprising regional trends and disparities around the U.S.
Perhaps most interesting, the top state to retire in, on LPL’s analysis, is Virginia—a state that falls fairly well down on the list of the fastest growing or healthiest state economies by more traditional measures looking beyond the interests of retirees. In fact, according to the U.S. Bureau of Economic Analysis, Virginia’s economy remained essentially flat in 2014, with zero GDP growth, putting it near the bottom of states on that metric.
LPL acknowledges the index rankings may raise eyebrows, but they reflect the fact that retirees’ best economic interest can differ somewhat from the best economic interest of a local or regional economy. As noted in the report: “The Retirement Index is also intended to spark discussion on how to improve desirability for pre-retirees, as no state received top grades across all six categories. The holistic nature of the index powerfully demonstrates that no state is perfect.”
Unsurprising in some respects, New York (50th) and New Jersey (49th) bottomed out the list because of factors such as high prices for housing and goods, along with higher tax rates and relatively strained public services due to higher population density. South Dakota, Minnesota, Wyoming and Wisconsin rounded out the top five, LPL says, for basically the opposite reason. Just holding the images of those states in the mind gives one a sense of what the important factors are for a state to rank well on LPL’s list.
NEXT: What makes a state “retirement desirable?”
Reflecting its experience working with real-world retirement savers and retirees—LPL came up with a shortlist of factors to use in ranking states’ retirement desirability. The full report contains detailed A through F letter-grade rankings on each of these factors for each state—making for a telling picture of the U.S. retirement landscape as a whole:
Financial: LPL says the financial health of pre-retirees as a group and the fiscal health of their states of residence are each linked to a fulfilling retirement. While lower growth states aren't precluded from high rankings on the list—for example, South Dakota had 0.6% GDP growth for 2014 but an LPL ranking in the Top 5—a persistently weak economy can drive higher taxes and general economic hardship.
Health Care: Clearly important for a smooth retirement, access to and cost of health care are key determinants of retirement satisfaction, LPL finds. Along with financial factors, health care perennially comprises a top concern in retirement industry research.
Housing: Affordable housing, both while active, during retirement, and, if needed, for nursing care, is of vital importance and can be a major expense, LPL observes.
Community Quality of Life: A more qualitative factor, LPL finds social connections and even the weather are other key determinants of retiree happiness and satisfaction.
Also included in the factors list are Employment and Education, especially for those people in the 15 to 20 years before retirement range, when savings should be at their peak, along with general financial and physical Wellness.
Important insights for retirement plan advisers emerge from the rankings—not least that the most popular regions for retirement relocation are pretty well down on the desirability rankings.
Notably, popular retirement states Florida and Arizona ranked 37th and 43rd, respectively, while less populated South Dakota and Wyoming were both positioned within the Top 5.
“It’s not all bad for the Northeast though,” LPL says, “as its states received the largest concentration of high health care, wellness, and employment and education grades … Only two other Southern states join Virginia among the top 20, with Tennessee at No. 10 and Georgia at No. 16.”
Anthony Valeri, senior vice president for research and the study’s co-author, notes retirement planning is very personal, so these types of rankings should be taken in context.
“Bearing in mind the personal nature of retirement planning, an examination of the index allows an individual to consider what matters most to him or her, and can facilitate a discussion with a financial adviser about how best to prepare to meet those goals,” he says. “Academics, policymakers and advisers increasingly recognize that retirement readiness includes not only finances, but a broad range of economic and quality-of-life factors.”
The full rankings are presented here.