Liz Weston

Dear Liz: Are retirement calculators a hoax? It seems that the published estimates for the amount of savings required are insanely high. If most U.S. citizens haven’t saved much and have a decent standard of living in retirement, where is the misperception? Let’s say an individual is resolved to choose hospice over intensive care — so we can reduce healthcare from the equation — and is no longer paying for a mortgage or college. How could someone really need to replace a high percentage of salary? Do we really need to save millions to retire? Even if we just spend the principal in the calculated estimates, we are truly old before we run out. I have got to be missing something.

Answer: You’re missing quite a few things.

People born between 1936 and 1945 — those aged 71 to 80 now — typically had enough savings, home equity, pension income and Social Security benefits to replace 99% of their annual incomes in retirement, according to a Pew Charitable Trust study. This generation benefited from steadily rising incomes and wealth levels through most of their working lives.

Early boomers, born between 1946 and 1955, aren’t quite as well off but typically can replace a comfortable 82% of their incomes.

They’re the last generation, though, that’s expected to be truly secure on average in retirement. Younger people are much less likely to have pensions. Stagnant incomes, rising costs and falling wealth levels further undermine their financial security.

Late boomers, born between 1956 and 1965, are on track to replace 59% of their incomes. GenX, born between 1966 and 1975, could see their incomes cut in half in retirement.

Imagine living on 50% of what you make now. If that would be easy — and if you’re really resolved to choose death over medical treatment — maybe you don’t have to worry about retirement calculations.

If the thought of eking by on half your current income makes you break out in a cold sweat, though, then you better start saving.