Chris Farrell: Retirement guru's advice: expect surprises and save for them

Henry K. "Bud" Hebeler left Boston with a graduate degree in engineering from MIT in 1956 for a job at Boeing in Seattle. Some three decades later after he made the trip in a VW bug, he retired as president of the company's giant aerospace unit. Dismayed at much of the retirement planning advice industry, he started a new career advocating for conservative personal finances and a frugal lifestyle.

He started the website Analyzenow.com. He wrote the website's financial planning software, which is mostly geared toward retirement planning. Bud was an invaluable resource to personal finance columnists like me. He died at age 84 on Aug. 21.

Bud's approach to personal finance is well worth highlighting. There's nothing remarkable about the core of his advice, especially when it came to retirement. It can be summed up in a few words: Save more. Yes, you hope you will earn a good return on your investments. But just in case, save more than the standard rules of thumb.

Why did he put such an emphasis on savings? He believed you can't get rid of uncertainty. Recessions happen. You might retire when a bear market decimates the value of your 401(k) or 403(b).

"Every single one of our friends has had some serious financial surprise during retirement that was completely unseen," he told me.

To give you an idea of how much to save, he once gave me this formula for figuring out how much to set aside for retirement while working. Take your monthly take-home pay, after all deductions and taxes. Multiply it by the number of years you will still work, and divide that figure by the number of years it's possible you have to live.

Say a 65-year-old plans on working another 10 years, expects to live to 95, and makes $2,100 a month after deductions for Social Security, Medicare, union dues and the like. The monthly amount she can spend from that paycheck would be $700 (2,100 x 10/30 = $700). The remaining $1,400 should go right into savings. I'm not sure I would go that far. but it gives you an idea how seriously he took preparing for the unexpected.

Clearly, Bud believed in thrifty living. For instance, he recommended downsizing into a smaller home and the earlier the better.

That said, frugality doesn't mean living cheap, he emphasized. He loved skiing and spending time with his children and grandchildren. No, spend money on what you truly value. In the meantime, don't forget to save along the way.

Christopher Farrell is senior economics contributor, "Marketplace," commentator, Minnesota Public Radio.