Report: Indiana above average in retirement preparedness

WASHINGTON – Hoosiers are in slightly better shape for retirement than most other people in the country, according to a new report.

But that’s not saying much.

Only about half of Indiana’s private-sector workers participate in retirement plans, and the average amount saved is too low, according to a study released Thursday by the National Institute on Retirement Security.

“Most people probably aren’t going to have that much more (income) than Social Security,” said Diane Oakley, the group’s executive director.

Oakley said the research and education organization did the report to show states why future retirees could struggle.

“Now, policymakers have a tool to identify the most urgent priorities and can take action to head off the looming retirement crisis in their states,” she said.

States were assessed on eight measures of financial security for future retirees in three categories: retirees’ likely income, the cost of housing and health care, and the strength of the job market for retirees.

Indiana did best in the last category. That’s primarily because the median hourly wage in Indiana for older workers was above average in 2012, the year for which the data were drawn.

Indiana’s 11th-lowest housing cost burden helped it fare better in cost of living than the national average.

And Indiana had the 14th-highest rate of private-sector workers participating in employer-sponsored retirement plans: 49.6 percent.

But the $26,971 average balance in defined contribution retirement accounts is below the national average and is less than half of the $56,306 average annual earnings of a Hoosier worker. Financial industry experts recommend that workers in their 40s have two to three times their salary in retirement plans.

Unless pension coverage and savings increase, the report says, the state’s share of older residents living in poverty could exceed the 2012 level of 7.2 percent.

“If people don’t have a pension, those costs are going to bear on government, and therefore government better figure out pretty quickly how to help private business develop retirement security for their citizens,” said Kathleen Kennedy Townsend, founder of Georgetown University’s Center for Retirement Initiatives. “I think what (the report shows) is it’s really a crisis right now.”

Since 2012, at least 25 states have considered proposals to study or establish state-sponsored retirement savings plans, according to the center.

Republican state Rep. Matthew Lehman introduced a bill this year to create portable individual retirement accounts for workers whose employers don’t offer one. The bill was not acted on before the Indiana General Assembly adjourned for the year.

Although the National Institute on Retirement Security found that every state could improve the financial security of future retirees, the institute gave the highest rankings to Alaska, Minnesota, North Dakota and Wyoming. Those states did best because of their relatively strong labor markets and lower retiree costs.

California, Florida and South Carolina ranked lowest. California and Florida, for example, have high costs for retirees, along with low access to workplace retirement plans and other problems.

Email Maureen Groppe atmgroppe@gannett.com. Follow her on Twitter: @mgroppe.