Marylanders have saved nowhere near the $1.2M they think they need to retire

If you feel behind on saving for retirement, you’re not alone.

Maryland residents estimate they need around $1.2 million to retire comfortably, according to a recent Northwestern Mutual survey.

But many in the state don’t even come close: Marylanders have on average $120,000 in retirement savings, according to a study from SmartAsset.

Half of respondents in Maryland believe they’ll be financially prepared for retirement when the time comes, yet less than a quarter had actually put together a financial plan, the survey found.

Affording retirement in Maryland — a notoriously high-cost-of-living state — can be a struggle. More people are tapping into their savings years before retirement. Others are working beyond traditional retirement years to make ends meet. And nearly half of workers in the private sector lack access to an employer-sponsored retirement plan.

Employer-sponsored plans include the best-known 401(k), as well as 401(a), 403(b) and 457(b) versions. There are differences in how employers contribute and whether it’s for private sector, public sector or nonprofit employees.

“A lot of the families that we serve don’t have a financial plan for retirement,” said Sara Johnson, cofounder and COO of the economic advancement nonprofit CASH Campaign of Maryland. “I think there’s a lot of concern and worry for them around how and when they’ll ever be able to retire.”

CASH Campaign of Maryland, which stands for Creating Assets, Savings and Hope, works with low- to moderate-income Maryland families on financial literacy. Johnson, the organization’s cofounder, said the organization has attracted many older adults.

Mark Johnson (no relation to Sara) left his first career nearly 20 years ago, when the local elected official he worked for in Washington lost her reelection.

He knew he had a 401(a), an employer-sponsored retirement plan for government employees, but beyond that he paid little mind to retirement.

“I’m embarrassed to say that I really wasn’t thinking much about it,” said Johnson, a 67-year-old retiree in Baltimore. “I really didn’t know how to think about retirement.”

Johnson turned his side hustle selling vintage and mid-century modern furniture into a business called Hunted House. It became his full-time job for around a decade.

But in that time, he wasn’t adding to his retirement accounts — and was actually dipping into his personal savings, he said. He also wasn’t contributing to Social Security, which would impact him later on.

“I should have thought more about it, but you know, I had property, I had the 401(a) and I did have a savings account, so that was as much as I really thought about it,” Johnson said. “Not that I didn’t think I’d get old, but I guess I figured I’d be set.”

Johnson now works part-time with the Y in Central Maryland, though he said not because he has to. He started out volunteering, looking for a way to get involved with his community when he moved to Baltimore. He was eventually hired on and said he enjoys working.

But there is a growing number of retirement-age adults in Maryland who are continuing to work because they must.

More than 26% of Maryland’s retirement-age adults, 65 years or older, are still working, according to a LendingTree study. Maryland has the third-highest number of working older adults, the study found.

For those who don’t have enough to retire at the typical age of 65, it can be “really disheartening and overwhelming,” said CASH Campaign’s Sara Johnson.

Contributing to the gap between Marylanders’ financial needs and how much they actually have is a lack of access to employer-sponsored retirement plans.

An estimated 1.42 million Maryland workers, both private sector and gig workers, did not have access to an employer-sponsored retirement savings plan, according to Georgetown University’s Center for Retirement Initiatives.

The state is trying to address this with Maryland Saves, a workplace savings program that provides workers with Roth Individual Retirement Accounts (IRAs). A Roth IRA is a tax-advantaged retirement savings account that uses post-tax money.

State legislators passed a law in 2016 to start the program when it was found that nearly 1 million Maryland residents did not have a retirement savings plan because their employer did not offer one. Maryland Saves launched in 2022.

Financial decisions made during and after the COVID-19 pandemic have added to the troubling signs. An uncertain economy and job market prompted some to cash out parts of their retirement accounts years ahead of time.

Now, with federal layoffs and cutbacks, it’s happening again.

“Not at the same levels, but we have seen families who’ve needed to dip into retirement to make ends meet while they’re looking for other work or to be able to pay bills, [or] to keep sending their kids to college,” Sara Johnson said.

Marylanders also have a rosier view of what they will need to retire in the first place, according to the Northwestern Mutual survey.

Across the country, Americans on average believe they need $1.46 million, about $260,000 more than Marylanders think they need.

That $1.46 million could provide $58,000 per year in retirement income, while $1.2 million is closer to $48,000 annually.

“That $1.46 million could be a great number for someone and not a good number for someone else, obviously,” said Jeffrey Crosley, CEO and Wealth Management Advisor at Northwestern Mutual’s Traverse Partners. Crosley is also a certified financial planner.

“Everyone’s circumstances are different, and everyone’s incomes are different, and what they need is different. But I think there always has to be an eye for tomorrow.”