Most people don’t think about what retirement will actually cost until they’re closer to it than they’d like to be. The number they’ve been picturing in their heads, a rough figure absorbed from half-remembered news articles or watercooler conversations, often turns out to be wildly different from what the data actually shows. And the most surprising part isn’t what you need to save. It’s how little most Americans have saved so far, and how dramatically the target changes depending on where you plan to spend those years.
Retirement isn’t just a financial finish line. For most people over 40, it’s the single largest financial project of their lives, one that intersects with their health, their housing, their state taxes, and their relationship with Social Security. Getting it right requires real numbers, not ballpark guesses. And in 2026, the gap between what workers have saved and what they actually need has become impossible to ignore.
This report breaks down the retirement savings gap by state, explains why your zip code matters as much as your 401(k) balance, and tells you what both national data and state-level research say about where you stand.
The Retirement Savings Gap Report: What the National Data Shows
The numbers from a major 2026 retirement security analysis are stark. Working individuals who have positive retirement savings held a median balance of $40,000 in December 2022. But across all workers ages 21 to 64, including the tens of millions with no savings at all, the National Institute on Retirement Security (NIRS) found that the median amount saved was just $955.
Let that sit for a moment. The typical American worker, across all ages and income levels, has less than $1,000 set aside for retirement.
This paltry level of savings may help explain why senior poverty is rising. The share of seniors living in poverty climbed to 15% in 2024, up from 14% a year earlier, making it the highest rate among all age groups, according to CBS News citing Census data.
So what do Americans think they need? According to Northwestern Mutual’s 2026 Planning and Progress Study, Americans’ target retirement number climbed to $1.46 million in 2026, $200,000 more than the prior year. That figure reflects the growing anxiety around inflation and longevity. The gap between $955 in median savings and a $1.46 million goal is not a rounding error. It’s a financial chasm that defines the retirement security crisis in this country.
As the NIRS report put it plainly: “The bottom line is that if Americans are not saving for retirement through their employer, then they are probably not saving at all.”
How Much Do I Need to Retire in My State?
Answering the question “how much money do I need to retire in my state” requires you to understand that retirement costs are not uniform across the country. They vary by as much as $1.5 million from the cheapest states to the most expensive ones.
A 2026 state-by-state analysis from personal finance site GOBankingRates, reported by CNBC, found that the estimated total savings needed to retire at 65 can differ by as much as $1.46 million depending on where you live. In Hawaii, retirees need about $2.2 million to stop working at 65 and cover essential living expenses for 25 years, including housing, groceries, transportation, utilities, and healthcare. That is the highest estimated minimum of any state. By comparison, Oklahoma has the lowest estimated total, at $735,284, to cover the same basic costs.
The analysis drew on average living costs for retirees 65 and older in each state using the latest data from the U.S. Bureau of Labor Statistics. GOBankingRates then subtracted average Social Security payments and estimated the savings needed to cover remaining expenses using a 4% annual withdrawal rate, a common rule of thumb among financial planners that assumes you can draw down 4% of your savings per year without depleting the principal.
The regional patterns are clear. Six of the ten states with the lowest savings requirements to retire are located in the Midwest, while every West Coast and Northeast state demands over $1 million in savings, pricing out many seniors from retiring in their home states.
For specific states, the picture sharpens considerably. New York requires about $83,817 per year in annual retirement income. With an average retirement age of 64 and a life expectancy of around 80, a New Yorker can expect roughly 16 years in retirement, requiring a total savings target of approximately $1.41 million, the second-highest of any state. Massachusetts retirees need roughly $83,135 per year, but because the average retirement age there is 66 and life expectancy around 80, the savings required drop to about $1.16 million, significantly less than New York despite comparable annual costs.
On the affordable end, Oklahoma retirees face average annual expenses of around $45,016 for someone 65 and older, and with an expected retirement length of about 13.4 years, the total savings needed come to approximately $723,859. Arkansas sits just above Oklahoma, with average annual retirement income of $54,329 and a similar expected retirement duration, bringing total required savings to about $728,010.
Which States Have the Largest Retirement Savings Gap?
The retirement savings gap report by state 2024 and 2026 data both confirm the same pattern: the states where workers are saving the least are often not the same as the states with the lowest retirement cost of living.
A 2026 SmartAsset analysis of U.S. Census Bureau data found that Massachusetts leads all states with a median household retirement savings of $150,000 and the highest retirement account utilization rate at 74.8%. The same study found that Mississippi ranks last, with median household retirement savings of just $35,000 and the lowest account adoption rate at 41.8%. That’s a gap of over $115,000 in actual savings between the highest and lowest states.
On average, Americans have roughly one year’s worth of their current annual income saved in tax-advantaged retirement accounts. For most households, that figure hovers around $80,000. Set against a retirement target that routinely tops $1 million in half the states in the country, that figure shows just how far behind most workers really are.
The NIRS data adds another layer of urgency by showing that the problem doesn’t fix itself with age. Workers nearing retirement are not dramatically more prepared than younger workers. Among 55-to-64-year-olds, the median amount saved for retirement is only $30,000. Even among those with savings, balances are often far too low to support a secure retirement, and too many households are being forced to choose between paying their bills and saving for tomorrow.
The state-level savings data also reveals stark structural inequities. Maryland households have the highest rate of 401(k) usage at 65%, with average retirement savings of $120,000, ranking it fifth overall nationally. Montana leads the nation in IRA adoption at 46.4%, with a median household retirement savings of $76,000. These are not wealthy coastal states in the conventional sense. They reflect different cultures around retirement saving, different employer plan availability, and different workforce compositions.
What Is the Average Retirement Savings for Americans?
The average balance among workers with a positive retirement account was $179,082. But this figure is distorted by a small number of high-balance savers, given that the median account balance was only $40,000, less than a quarter of the average.
That gap between the average and the median is one of the most important statistics in the entire retirement security debate. It means that the few Americans who have saved aggressively are pulling the national average up dramatically, while the majority of workers sit far below it.
The typical employee contribution rate to a defined contribution savings plan, such as a 401(k), falls between five and six percent, while the typical employer contribution rate is just under three percent. That combined rate of roughly eight to nine percent is far below what most financial planners recommend for workers who start saving in their 30s or 40s. The gap widens for workers who don’t have access to a plan at all.
The NIRS report found that many workers still lack access to employer-provided retirement plans, have minimal savings, and face growing tradeoffs between saving for retirement and meeting basic financial needs such as housing and student loan repayment. This is not a fringe problem. Drawing on U.S. Census Bureau data, the NIRS research found that roughly 56 million workers lack access to any employer-provided retirement plan.
For those workers, the challenge is structural, not personal. You can’t contribute to a 401(k) that doesn’t exist. And opening an IRA independently, while possible, rarely happens at scale. The report noted that few people contribute to IRAs on their own and that most IRAs contain rollovers from employer-sponsored 401(k) plans rather than independent contributions.
If you’re concerned about what aging looks like financially over time, the decisions you make at key health milestones matter too. The same proactive mindset that applies to living well into old age applies directly to your financial longevity.
Why Your State’s Tax Rules Change the Equation
The raw savings target you need to hit is only part of the picture. Where you retire has a dramatic effect on how far those savings actually go, because state tax treatment of retirement income varies widely.
Nine states have no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In those states, 401(k) withdrawals, IRA distributions, pension income, and Social Security benefits are all free of state-level taxation.
Beyond those nine, several additional states exempt retirement income specifically. Michigan completed its phase-out of the retirement income tax for the 2026 tax year, meaning pensions, 401(k) distributions, IRA withdrawals, and other qualifying retirement income are now exempt up to $67,610 for single filers or $135,220 for joint filers, applicable to all retirees regardless of birth year. West Virginia fully eliminated its state tax on Social Security benefits as of January 1, 2026, completing a three-year phase-out.
According to the Tax Foundation’s 2026 State Tax Handbook, a California retiree with $120,000 in annual income pays roughly $7,200 more in state income tax every year than a comparable retiree in Wyoming. Over a 25-year retirement, that difference compounds to more than $180,000 in reduced spending capacity.
This matters enormously for the retirement savings gap report by state 2024 and 2026 calculations, because the minimum savings needed to retire in a high-tax state like California or Massachusetts must account for ongoing state income tax obligations on withdrawals, not just the cost of housing and groceries.
As of January 2026, nine states still tax Social Security benefits at the state level: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and one additional state. If you live in one of these states and are counting on Social Security to cover a large portion of your retirement income, your effective tax burden in retirement will be meaningfully higher than in states that don’t tax those benefits.
The Social Security Problem No One Wants to Talk About
Social Security is the backbone of most Americans’ retirement income. It accounts for roughly half of income for the typical older adult, while income from retirement plans, both traditional pensions and defined contribution accounts, represents only about one-fifth of income on average.
But Social Security is facing a structural funding problem that adds urgency to every retirement savings decision. If the two Social Security trust funds were combined, reserves are projected to become depleted in 2034, at which point 81 percent of scheduled benefits would still be payable from ongoing tax revenues. That means a roughly 19 percent automatic cut to benefits if Congress takes no action by that date.
According to the Committee for a Responsible Federal Budget, without reform the combined Social Security trust funds will be depleted in 2034, at which point program benefits would be reduced by 19 percent. This isn’t a distant hypothetical. By 2034, many workers currently in their mid-40s will be approaching or entering retirement.
The implication for state-by-state retirement savings calculations is direct: if you’re building your plan around current Social Security benefit projections, you may need to build in a buffer of 15 to 20 percent over your expected benefit to account for potential cuts. That alone could add $50,000 to $150,000 to what you need in personal savings, depending on your projected benefit and retirement length.
What This Means for You
The retirement savings gap by state data makes one thing obvious: there is no single number that works for everyone. Someone planning to retire in Hawaii needs roughly three times more in savings than someone retiring in Oklahoma, even assuming the same Social Security benefit and the same lifestyle expectations. Your state of residence, your tax situation, and your access to an employer retirement plan are each variables that carry hundreds of thousands of dollars in weight over the course of retirement.
Here’s what the data points toward in practical terms. First, if your employer offers any matching contribution to a 401(k), maximizing that match is the closest thing to a guaranteed return on investment that exists in personal finance. The typical employer contributes just under three percent, but you have to contribute enough to trigger it. Workers who don’t hit that threshold are leaving real money behind. Second, in 2026, the 401(k) contribution limit is $24,500, with an additional $8,000 available to workers ages 60 to 63 as a “super catch-up” provision beyond the standard limit. If you’re in your 50s or early 60s, these catch-up provisions exist specifically for your situation.
Third, know what your state actually costs in retirement, not just in living expenses but in taxes on your withdrawals. A move from a high-tax state to a tax-friendly one can effectively add tens of thousands of dollars to your retirement income without saving an extra cent. Fourth, don’t build a retirement plan that assumes current Social Security benefits will remain fully intact. The evidence suggests some degree of reform is likely before 2034, but “reform” could take many forms, including benefit reductions for higher earners, changes to the full retirement age, or adjustments to cost-of-living increases. Building a modest buffer into your own savings is the most sensible response to that uncertainty.
The American retirement system wasn’t designed to carry people alone. As NIRS Executive Director Dan Doonan noted, “most retirement programs today rely on workers saving voluntarily, with the tension between saving and the cost of buying a home, daycare, and college creating enormous challenges for the middle class.” That tension is real, and it’s not a personal failing. But the state-by-state retirement savings data is clear: wherever you live, the target is almost certainly higher than you think, and the gap between where most Americans stand today and where they need to be is wider than most want to acknowledge. The earlier and more specifically you engage with your own number, the more room you have to close it.
A.I. Disclaimer: This article was created with AI assistance and edited by a human for accuracy and clarity.