“The Number” is a subject that we don’t discuss in polite company. It’s the amount that we need to adequately fund our retirement.
Lee Eisenberg is the former editor in chief of Esquire. More recently, he was executive vice president and creative director at Lands’ End. In this book, Mr. Eisenberg lays out some of the disturbing facts about retirement and also explores other issues, such as making your senior years meaningful.
You have probably seen the headlines in the newspaper during January 2011. The oldest members of the Baby Boom generation are turning age 65 at the rate of about 8,000 per day. It has been an affluent, high-spending generation, and will be an enormous load on Social Security.
Life expectancy has been getting longer. When social security was enacted, most people only lived a few years after retirement. Now people commonly live to age 90 and beyond. Scientists say children living now may live to be age 200 and beyond. Since these people will be over age 65 for more than half of their lives, it seems clear they will have to work for more years.
Here are some statistics from the book: Of workers age 55 and older, only one in four has invested assets of more than $100,000. One in three has less than $50,000. Most baby boomers are afraid they will outlive their money, for good reason.
Eisenberg breaks us down into four classes relating to how we determine our Number. Most of us are Procrastinators – who are in denial and don’t develop a number at all. Some are Pluckers – who choose an arbitrary amount. Some are Plotters – who analytically develop their Number. Some are Probers – who are more concerned with their inner life, including having a meaningful future life.
We really should be saving for retirement from the beginning of our careers. When we are young, it seems infinitely in the future. The demands of living, including supporting, educating and housing a family, sucks up almost everything we earn and can also result in incurring big debts. Also, corporate retirement systems have moved from the defined benefit annuity model, based on past earnings, to the self-financed 401(k) model. Most people simply don’t contribute enough to their 401(k) and don’t manage what they do contribute very well.
Our Number should factor in future uncertainty. A long life expectancy can require high medical costs. I don’t know about you, but my parents’ occupation during their senior years seemed to be going to the doctor. Inflation is another factor that decimates retirement savings. The value of your retirement savings is eroded by inflation. It’s easy to underestimate what your cost of living will be when you underestimate these costs.
The Number isn’t going to solve the problem of planning for retirement, but may make you more aware of the issues involved and motivate you to seek help from a qualified financial planner.
Buy it on Amazon: The Number: What Do You Need for the Rest of Your Life and What Will It Cost?.
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