The "Magic Number" Myth: What Washington Public Employees Really Need to Know About Retirement Planning

​"How much do you need to have saved to feel confident in retirement in addition to your pension?"

This question often leads to a specific dollar amount—$500,000, $750,000, or even $1 million. When asked how they arrived at that figure, many Washington public employees cite online calculators or general rules of thumb.

After working with government employees across Washington State, one thing becomes clear: The "magic number" approach to retirement planning is often misleading, especially for those with pensions. Here's what actually works in 2025.

The Real Way to Calculate Your Retirement Needs

The most effective retirement planning process for Washington public employees looks quite different from the standard approach:

Step 1: Start With Your Life, Not a Formula

Most financial literature suggest you'll need 55-80% of your pre-retirement income [1]. However, this generic guidance misses a crucial point: Your retirement spending depends on YOUR specific plans, not statistical averages.

A more effective approach:
·       Create a detailed breakdown of your current spending patterns
·       Identify which expenses will change in retirement (commuting costs down, travel expenses up?)
·       Pay special attention to healthcare costs, which typically increase
·       Separate essential expenses (housing, food, utilities) from discretionary ones (travel, hobbies) [2]

The reality is that retirement spending varies significantly based on individual goals and circumstances. Some public employees find they need more than their working income to fund active retirement plans, while others require substantially less after downsizing or relocating.

Step 2: Understand Your Unique Income Mix

As a Washington public employee, your retirement income structure has distinct advantages:
1.        Your defined benefit pension (PERS, TRS, LEOFF, or other systems)
2.        Social Security benefits
3.        Personal savings (DCP/457b plans, IRAs, etc.)

Your target for savings depends heavily on your pension benefits. Here's how to find your true savings requirement:
1.        Calculate your expected annual expenses in retirement
2.        Subtract your projected pension and Social Security income
3.        The remaining gap is what your savings need to cover

For example, if you need $80,000 annually but will receive $35,000 from your pension and $25,000 from Social Security, your savings only need to generate $20,000 per year—a substantially different target than for someone without a pension.

Step 3: The 4% Rule Reimagined for Public Employees

The traditional 4% rule suggests multiplying your annual withdrawal need by 25. While this provides a useful starting point, Washington public employees should consider:
·       The security of your pension fundamentally changes the equation (you need less in liquid savings)
·       Utilizing a dynamic withdrawal plan that adjusts based on your portfolio balance
·       Your personal risk tolerance affects your "safe" withdrawal rate

For the example above, if your savings need to generate $20,000 annually:
·       Traditional 4% rule: $20,000 ÷ 0.04 = $500,000

Step 4: Reality-Check Your Progress

Standard retirement savings milestones rarely account for defined benefit pensions. Here's a more appropriate approach for Washington public employees:
1.        Calculate your expected annual pension using DRS tools or estimates
2.        Determine what percentage of your retirement needs will be covered by guaranteed sources
3.        Track progress toward funding the remaining gap

If your pension and Social Security will cover 75% of your needs, you're in a significantly different position than someone who must fund their entire retirement from savings.

Step 5: Stress-Test Your Plan for 2025's Realities

Your retirement plan must withstand real-world challenges:
·       Inflation fluctuations
·       Market volatility
·       Unexpected healthcare expenses
·       Longevity considerations (planning to age 95+ is increasingly prudent) [3]

Creating multiple scenarios helps test your plan's resilience:
·       Best case (strong market returns, moderate inflation)
·       Expected case (average returns, typical inflation)
·       Stress case (poor returns, higher inflation, unexpected expenses)

The Washington Public Employee Advantage

Here's what many financial advisors miss: Washington public employees possess unique advantages in retirement planning. Your pension provides a foundation of guaranteed lifetime income that most Americans simply don't have.

This pension foundation dramatically changes both your required savings amount and optimal withdrawal strategy. With a significant portion of essential expenses covered by guaranteed income, you may have more flexibility with your investment approach.

Your Action Plan
1. Next 24 Hours: List all your expected retirement expenses in two columns: "Must-Haves" and "Nice-to-Haves"
2. This Week: Request your pension estimate from the Department of Retirement Systems to see exactly what your monthly benefit will be
3. This Month: Create your "gap funding plan" to determine how much your savings need to generate annually
4. This Quarter: Test your plan against different inflation and market scenarios

There is no universal "magic number" for retirement—especially for Washington public employees with defined benefit pensions.

What matters is understanding your specific income sources, expenses, and how they work together. With the right approach that accounts for your unique benefits, you might discover you're closer to retirement readiness than generic calculators suggest.

Sources
​[1] https://www.fidelity.com/viewpoints/retirement/retirement-income-sources
[2] https://www.tiaa.org/public/pdf/r/retirement_expense-income_worksheets.pdf
[3] https://www.nerdwallet.com/calculator/retirement-calculator

-Seth Deal