10 States Where Retirees Have the Biggest Drops in Income

Many people assume that as you get older, you become more financially stable. This assumption is correct, at least to some degree. A 2009 study called The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation, found that people make their best financial decisions at age 53.

When first starting out in their 20s, people make some of their worst financial decisions. But as time goes on, this usually improves. At age 53, it reaches a peak, and then it declines again after that — especially when people are in their 60s and 70s. National median income estimates reported by the Census Bureau are in line with this study.

Data source: Census Bureau

Median income follows the same pattern, as households headed by 15- to 24-year-olds earn the lowest incomes — $34,311 each year. The older age groups have higher median incomes, with household headed by 25- to 34-year-olds earning $52,702, and households headed by 35 to 44 year olds earning $64,973. Income peaks in the 45 to 54 age group, when median income reaches $67,141. This is the time when people are at high points in their careers, and their life experience lends to better financial decision making. Median income jumps down to $57,538 between ages 55 and 64, as some people end their careers or halt their climb up the corporate ladder.

Then in the retirement years, median income declines starkly to $35,611 — almost back down to the same level as the youngest group. Few people retire with the same earnings and purchasing power capabilities they had before retirement. A general rule of thumb is that people can live comfortably during retirement if they bring in about 70% of their working income. Therefore, a person who lived on $100,000 each year pre-retirement could live comfortably on $70,000 annually during retirement.

Interest.com recently conducted a retirement study which examined the differences in pre-retirement and post-retirement median incomes in each state. The results indicate that only two states — Nevada and the District of Columbia — have retirees with median incomes that are at least 70% of their typical pre-retirement earnings.

The remainder of U.S. states show median income numbers that do not meet this threshold. We created a list of states where retirees ages 65 and older have the biggest drops in income. These states all have replacement income percentages of around 55% or below — a far cry from the recommended 70% figure or even the national average figure, which is around 60%.

Source: Thinkstock

Source: Thinkstock

Rhode Island

  • Median income for pre-retirees (ages 45 to 64): $71,756
  • Median income for those ages 65 and over: $39,577
  • Replacement income percentage: 55.15%
  • Percent of households in the 65 and over age group: 23.9%

Source: Thinkstock

Source: Thinkstock

New York

  • Median income for pre-retirees (ages 45 to 64): $68,696
  • Median income for those ages 65 and over: $37,769
  • Replacement income percentage: 54.98%
  • Percent of households in the 65 and over age group: 23.7%

Source: Thinkstock

Source: Thinkstock

Pennsylvania

  • Median income for pre-retirees (ages 45 to 64): $64,401
  • Median income for those ages 65 and over: $35,009
  • Replacement income percentage: 54.36%
  • Percent of households in the 65 and over age group: 26.2%

Source: iStock

Source: iStock

New Hampshire

  • Median income for pre-retirees (ages 45 to 64): $78,157
  • Median income for those ages 65 and over: $42,406
  • Replacement income percentage: 54.26%
  • Percent of households in the 65 and over age group: 23.5%

Source: Thinkstock

Source: Thinkstock

Wisconsin

  • Median income for pre-retirees (ages 45 to 64): $64,563
  • Median income for those ages 65 and over: $34,721
  • Replacement income percentage: 53.78%
  • Percent of households in the 65 and over age group: 23.6%

Source: Thinkstock

Source: Thinkstock

New Jersey

  • Median income for pre-retirees (ages 45 to 64): $85,778
  • Median income for those ages 65 and over: $45,092
  • Replacement income percentage: 52.57%
  • Percent of households in the 65 and over age group: 24%

Source: Thinkstock

Source: Thinkstock

Connecticut

  • Median income for pre-retirees (ages 45 to 64): $84,757
  • Median income for those ages 65 and over: $44,240
  • Replacement income percentage: 52.2%
  • Percent of households in the 65 and over age group: 24.7%

Source: Thinkstock

Source: Thinkstock

Minnesota

  • Median income for pre-retirees (ages 45 to 64): $74,284
  • Median income for those ages 65 and over: $38,531
  • Replacement income percentage: 51.87%
  • Percent of households in the 65 and over age group: 22.4%

source: Facebook

source: Facebook

North Dakota

  • Median income for pre-retirees (ages 45 to 64): $72,043
  • Median income for those ages 65 and over: $35,293
  • Replacement income percentage: 48.99%
  • Percent of households in the 65 and over age group: 22.1%

Source: Thinkstock

Source: Thinkstock

Massachusetts

  • Median income for pre-retirees (ages 45 to 64): $82,112
  • Median income for those ages 65 and over: $40,020
  • Replacement income percentage: 48.74%
  • Percent of households in the 65 and over age group: 23.9%

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