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Yahoo Finance had an article citing data that Generation X, people born between 1965 and 1980, has only accumulated $66,000 for retirement against an expected need of $750,000. There was no mention of where the data came from, whether $66,000 was an average or a median and of course the assumption that all 50 million (per a Google search) Gen-Xers need the same dollar figure doesn't make a lick of sense. As on older Gen-Xer, I am of course interested in articles like this.

Despite the lack of rigor in the article, it can't be a surprise to anyone, that all the generations are undersaved for their retirements. I would also note that I have seen, and blogged about, countless other articles like this where the average or median savings is all over the place dollar wise but they are always way short of where they should be. If the average age for Gen-X is 47 or 48 then it's not like they are doomed if they don't have $600,000 so far. They still have a lot of compounding time and years to accumulate more, even the oldest Gen-Xers. But the lower the number the bigger the hole to dig out of and the greater the chance of something having to give. The types of things that usually have to give include working longer, downsizing and/or much less discretionary spending.

No matter what number you think you need, the number you wind up with is your reality. At some age, the number on your financial plan becomes a tangible thing versus an obscure concept. That age is different for all of us. If this is unclear, you can think of it this way; if you are one year from retirement and your goal is $750,000 and you currently have $743,000 then you probably understand what $750,000 actually is. If you're 41, your number is $825,000 and you have $215,000 it is going to be difficult to think of $825,000 as anything other than an obscure concept. That's ok, just keep plugging away.

As you start to get close to retiring you will start to have an idea your chances of hitting your number. In the example above, if you're 61 with $215,000 and your number is $750,000 then it is likely you will be short. You need to admit that to yourself and plan accordingly.

It is widely accepted that a 4% withdrawal rate is safe in terms of not running out of money. The testing for that relies on bond market performance that no longer exists but we can leave that for another post. At 61, with $215,000 and planning to retire at 65, they could wind up with $300,000 (saving $10,000/yr and getting 25% growth, a more aggressive set of assumptions might get this scenario up to $400,000). A 4% withdrawal rate for $300,000 would be $1000 month. All planning over the years, the safe reality is $1000/mo from the portfolio. Something will have to give.

This might be a bummer but it's not a catastrophe, but something will have to give. Working for three more years could add $30,000 in accumulation and there could be 20-25% more growth and this person is knocking on the door of $400,000 and their Social Security would be a little higher thanks to waiting until 68 to start.

I'll also take the opportunity to mention the optionality of being able to work longer in the face of appearing to be a little short. A common pushback on that idea is not being ablebodied enough to do it. I saw something recently, about 1/4 of people aged 65 and older have a disability of some sort the prevents them from working. Not eating crap and doing some sort of vigorous resistance training with weight on a regular basis will do a lot to greatly reduce the odds of being disabled at 65. Obesity and Type 2 Diabetes rates tell us that most people don't do these things but they, along with your savings rate and to a lesser extent your spending are the things you can control. Give your future self this optionality and take control of them, solve your own problem.