I’m Concerned With Generation X’s Retirement Goals

This past week I received an email about a survey that Charles Schwab conducted called Rethinking Retirement. I went to their website and decided to take their survey. At one point in the beginning of their survey it asked “How much money do you think you need to retire?” To come up with some sort of answer that wasn’t directly pulled out of my you-know-what, I ran some numbers using my little retirement calculator. My calculator told me that I would need somewhere in the neighborhood of $3.9 million so that’s what I entered. It then asked me for my birthyear and then it took me to this screen:

The average Generation Xer who took the survey thinks they will need $1.2 million to retire on. I gotta tell ya, I don’t think that’s enough. Let’s think about it for a minute. Here’s a look at the possible first-year income on $1.2 million based on three different withdrawal rates:

Not too bad until you consider the fact that these numbers don’t include inflation. If the average Gen Xer is my age (38) they have about 27 years until retirement if they retire at 65. Here’s a look at the numbers after you adjust them for a 3% inflation rate over the next 27 years (I realize inflation has been running higher than 3% as of late, but 3% has been the long-term inflation rate):

Call me crazy but I just don’t see $21,000 to $26,000 (I wouldn’t recommend a 6% withdrawal) as being a comfortable retirement income. Sure, there will be some Social Security income available but I can’t imagine it being more than $20,000 to $25,000 per year. Including Social Security, you’re looking at an income of $41,000 to $51,000 per year in today’s dollars.

Is it enough? I don’t think so. What about you?