How much will you need to retire? It's time to find out

Published January 8, 2006

Do you know your number? I'm not talking about your age or your blood pressure. The number in question is how much money you'll need to have at retirement to have a reasonable chance that your money will last as long as you do.

Most people have no idea. The Employee Benefits Research Institute says its surveys show only four out of 10 workers have ever tried to calculate how much they'll need - and that includes people who admit they're just guessing.

Most people probably don't want to know. They have a pretty good idea they haven't saved enough and they'd rather not be reminded of the fact. Last year Americans as a group spent more than their income, giving us a national savings rate just below zero.

Yet the number will make a huge difference in the quality of life most of us will have for at least a decade, if not two or three. Unless you've got a good pension that adjusts for inflation or you plan to die on the job, ignoring the number is dangerous.

Former Esquire editor Lee Eisenberg is so taken by the number's importance that he wrote a book titled simply The Number, released last week with considerable hype from the publisher. Anyone contemplating retirement, especially early retirement, would do well to read it before pulling the trigger. It might save them from the fate of Eisenberg's fictional Tom Case Jr., who retired blissfully to the Arizona desert at 60 with $455,000 and a part-time consulting gig, only to end up in bankruptcy.

Eisenberg's book is a wakeup call and with its breezy style, it's more readable than most. It also gets points for prodding readers to think beyond money to what they'll do with their time and energy in retirement. But no book can tell you your personal number. You have to do the math and decide what assumptions to make about future inflation and investment returns or you have to get a financial adviser or computer program to do it for you.

It doesn't have to be difficult. Many Web sites offer simple calculators, such as the "ballpark estimate" at www.choosetosave.org to get you started. Workers who are over 40 or who are younger with substantial income or assets would benefit from a more detailed plan and advice. You can get a good plan and sometimes solid advice for free or a few hundred dollars Consumer Reports offers its opinion on the options in the February issue. But be prepared to pay more if you want hand-holding and follow-up to help you stay on track.

Don't let the size of your number or uncertainty about the future discourage you from taking action. Any money you save toward retirement will be better than none. Social Security is the only source of income for 22 percent of the nation's elderly. Ask one of them whether having an extra $100 a month would make any difference.

Free Phone Advice

Members of the National Association of Personal Financial Advisors will be offering free advice by telephone from 9 a.m. to 6 p.m. this Thursday and again on Jan. 27. To ask a question, call toll-free (888) 919-2345. Kiplinger's Personal Finance magazine is sponsoring the program, which last year attracted 7,560 calls. It's being billed as an opportunity to jump start your retirement plan. Callers can also ask about topics such as investments and estate planning.

Can I file a joint return the year after my spouse died or do I have to file as single?

If your spouse died in 2005, you can file a joint return for 2005. If your spouse died in 2004 or 2003, you must file as an individual, but you may be eligible for qualifying widow or widower status, which means you can use the joint return tax rates. To qualify you must not have remarried and a dependent child must have lived with you. Check the IRS rules on dependents if you think you might qualify.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to hhuntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.