What a Savings Chart Can't See About Your Retirement

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

There's a several charts that I have seen that show how much you "should" have saved by each age.

Picture Janelle. She's 52, a budget analyst for a county, and a PERS 2 member with 24 years of service. She and her husband, Tom, have about $750,000 saved between their DCP accounts and IRAs.

She finds 50 on that chart, compares it to their balance, and decides they're behind.

Their youngest has one year of college left. For the last decade, most of what didn't go to the mortgage went to braces, club volleyball, a second car, and tuition.

I understand why she'd feel that way. I also think the chart is missing most of her story.

The two studies that disagree

Janelle's worry is common. The research on it doesn't agree with itself.

The Center for Retirement Research at Boston College publishes the National Retirement Risk Index. It estimates the share of working households at risk of not keeping their pre-retirement standard of living once they stop working [1]. In its 2022 update, that share fell to 39 percent, the lowest since the index started in 2004 [1]. In 2013, it was 52 percent [2].

A 2006 study in the Journal of Political Economy came at the same question from another direction. The researchers modeled each household's own path, including earnings, taxes, pensions, Social Security, medical costs, and uncertain lifespans. Using data from 1992, they found fewer than 20 percent of households had less wealth than their targets, and most of those shortfalls were small [3].

So which one is right?

I don't think either is wrong. They measure different things, and they use data decades apart.

What I take from both is that how far behind you look depends on the yardstick you pick.

Your pension is still being built

One detail in the Boston College update caught my eye. The share at risk dropped for households with traditional pensions, and the researchers note that more of those pensions are now in the public sector, where they make up a big part of total pay [1].

That's Janelle. It's probably you, too.

Her PERS 2 pension equals 2% times her years of service times her average final compensation, which is her highest 60 consecutive months of pay [4]. Every year she works in her 50s adds service credit and likely raises that average.

The bigger lever is timing.

If you retire from PERS 2 before 65 with fewer than 30 years of service, your benefit is cut by an actuarial factor. With 30 or more years, the cut is much smaller, especially for members who joined before May 2013 [4]. Using the current DRS factors, retiring at 57 with 29 years would pay Janelle about 48 percent of her formula benefit. Retiring at 58 with 30 years would pay 89 percent [4].

That's one more year of work for nearly double the monthly check, and no savings chart would ever show it.

When the tuition bill stops

In my practice, I see the same pattern over and over. The years when kids are at home are the most expensive part of a working life, and retirement savings are usually what gives.

Then the last tuition payment clears.

For Janelle and Tom, that frees up roughly $2,000 a month. Money like that tends to drift into a nicer car or a kitchen remodel. Or it goes to work.

DCP has room for it. For 2026, the regular limit is $24,500, and anyone 50 or older can add $8,000 more, for $32,500 total [5].

But if you had $150,000 or more in FICA wages in 2025, your age 50 catch-up may have to go in as Roth [5].

If Janelle and Tom send that $2,000 a month into DCP, that's $24,000 a year saved before it gets absorbed into their lifestyle.

Nobody can promise this window

Some people have kids later, and the expensive years run right up to retirement. A health problem or an aging parent can close the window early.

So I wouldn't count on your late 50s to rescue a plan. Writing them off would be a mistake too. For many Washington public employees, those last few years carry more weight than any other stretch of the career.

A better place to start

If you feel behind, I'd start somewhere other than another chart.

Log in to your DRS account and run the Benefit Estimator at two or three retirement dates [4]. Pay close attention to the date you cross 30 years of service.

Then list the costs you expect to end in the next five years. Decide now how much of that money goes to DCP, and raise your contribution the month it frees up. Changes can take up to 30 days to show up, depending on your employer's payroll [5].

The chart is the same one she started with. She just knows what it leaves out now.

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If you’re concerned about your current financial plan and would like to explore professional help, consider reaching out.

I specialize in helping Washington Public employees who are nearing retirement or are retired, reduce taxes, maximize pensions, and retire stress-free.

No sales pressure. No obligations. Just professional guidance to help you make the best decision for your financial future.

-Seth Deal

Sources

[1] Center for Retirement Research at Boston College. "The National Retirement Risk Index: An Update from the 2022 SCF." February 27, 2024. https://crr.bc.edu/the-national-retirement-risk-index-an-update-from-the-2022-scf/

[2] Center for Retirement Research at Boston College. "NRRI Update Shows Half Still Falling Short." December 16, 2014. https://crr.bc.edu/nrri-update-shows-half-still-falling-short/

[3] Scholz, John Karl, Ananth Seshadri, and Surachai Khitatrakun. "Are Americans Saving 'Optimally' for Retirement?" Journal of Political Economy, August 2006. https://ideas.repec.org/a/ucp/jpolec/v114y2006i4p607-643.html

[4] Washington State Department of Retirement Systems. "PERS Plan 2." https://www.drs.wa.gov/plan/pers2/

[5] Washington State Department of Retirement Systems. "DCP – Deferred Compensation Program." https://www.drs.wa.gov/plan/dcp/