What's Your Number

Figuring out how much money you need to retire -- hint: it involves a lot of dollars and sense -- has become the latest consuming passion


Gael Miller is fairly sure $2 million will bankroll "a modest, not movie star" existence.

Steve O'Donnell wavers between his "realistic" $1 million and his "fantasy" $4 million.

Then there's Francis McAndrews, who says a cool $2.5 million should do it.

The digits differ, but the dreams are the same: to accumulate a pot of dough large enough to live on comfortably after retirement.

It used to be called your "life's savings." Then it became your "nest egg." These days, it's simply known as The Number, or what Lee Eisenberg describes in his recently released and buzzed-about book of that title: How much money do you have to save before you can safely retire? As millions of baby boomers approach retirement age -- and Americans of all ages see company pension plans vanishing or being frozen and Social Security diminishing as a safety net -- The Number has become something of an obsession.

"Over the last two and a half decades, there has been a sea change," Eisenberg said. "A large part of my book is devoted to what I call the old part of your life, in which we relied on pensions and the Social Security system, and the new rest of your life, in which we are asked to be the captains of our own ship. It's coming at a time when it's just dawned on people that there is nobody else out there reliable enough to take care of us in our old age.

"We can no longer hide from the reality that we're going to have to do this ourselves."

The Number taps into a growing undercurrent of fear over the future: As people live longer, and everything from health care to energy to housing seems to cost more, how will they afford to live once they stop working?

"It's such a huge amount to think about now," says Miller, 31, a Baltimore financial analyst who started saving for the future three years ago. "That number has to last you at least 20 years. It's got to figure in your health and spending habits and how much prescription drugs will cost you. There are so many variables. I'm skeptical that I'll be able to retire by 65, but the way things are going, it'll be more like 68 if I'm lucky.

"It's overwhelming to think about it," Miller says. "It's scary."

Being in the financial sector, though, forces her to think about it, for herself and her clients. But they might be in the minority, according to several surveys.

According to Eisenberg's book, 40 percent of those asked say they are saving nothing for the future, and those who do save put aside barely a penny out of every dollar they earned.

A 2005 Retirement Confidence Survey found that 55 percent of workers say they are behind schedule in saving for their life after work because of everyday living expenses, according to the nonprofit Washington-based Employee Benefit Research Institute.

Despite falling behind on savings, 66 percent still believe they will reach their savings goal by retirement even though most haven't even tried calculating how much money they will need when they stop working, EBRI says. The group calls this discrepancy "false confidence."

Money burns a hole ...

Blame that misplaced optimism on the age of instant gratification and easy credit. These days, many would just as soon deny themselves food than live without that $1,095 Prada leather shoulder bag or that $2,799.99 Philips 42-inch, high-definition plasma TV.

But for people like Darrell Burnette, a 39-year-old Washington pharmaceutical rep, that approaching big 4-0 birthday and a job change seven months ago have forced retirement worries into the forefront.

"I'm not really good at just taking money out of my paycheck and putting it aside, but it's become more important as I get closer to 40," Burnette says. "It's made me more focused now than I've ever been. No more shopping sprees, that's for sure."

A company pension plan, investments in personal stocks and signing up recently for a 401(k) savings plan has helped ease some of his concerns, but his one-time goal of retiring in his 50s now seems unlikely -- especially since Burnette would like to travel everywhere he's never been before and anywhere warm when he stops working.

"I've been getting rid of a lot of unnecessary debt, which I hope to finish [paying off] by the end of the year," Burnette says. "I want to buy a house. I haven't really thought about a specific number, but I have thought more about the age I want to retire. How much would it take? $100,000 a year? I don't know."

His 32-year-old colleague, Francis McAndrews, started thinking about his own number years ago and started saving when he realized he and his wife, Jennifer, 33, would like to retire by their mid- to late-50s.

Preparing for the day when he can coach lacrosse and travel occasionally, McAndrews contributes 15 percent of his pre-tax earnings into a 401(k), participates in the company stock purchase program and invests all his bonus commissions and his wife's earnings as a substitute teacher into stocks with the help of a financial adviser.

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