How much savings you need to retire comfortably is a vexing question in the 401(k) era. "What are the chances that you will outlive your days in comfort? Do you have what it takes right now? What happens if you don't make your Number?" wrote Lee Eisenberg in 'The Number: What Do You Need for the Rest of Your Life, and What Will It Cost?' "And, assuming you are not fighting for sheer survival, what are you prepared to give up? Are you open-minded about living in a place that's about the size of your family room?"
The financial-planning ecosystem has devised numerous formulas and survey results to arrive at the Number. A recent example comes from Bloomberg and the 553 investors worldwide who were surveyed. The collective answer on how much you need to retire ranged between $3 million and $5 million. (Yes. You read that right.) Problem is, this number and others like it are meaningless, void of useful information. There is no magic number, no infallible rule of thumb that that solves the Number question.
People with a retirement savings plan at work have a fraction of that sum, of course. They are still better off. Economist John Sabelhaus for the AARP Public Policy Institute calculates that almost 48% of workers are not covered by a retirement plan at work. The evidence is overwhelming that people don't save for retirement without access to an employer-sponsored retirement savings plan.
This isn't a call for retirement planning nihilism. Instead, for those with some retirement savings the key question isn't "What is my number?" but "What really matters to me?" Money matters. Coming up with a financial blueprint is important. But our definition of wealth and resources should include education, skills, connections, and purpose. For many people their vision of a good retirement will be a variation on the life they have lived and the activities they have enjoyed all these years.
Two practical books that reject the Number perspective can help your retirement planning journey. The recently published Retirement Reboot by journalist Mark Miller offers practical financial advice most of us can take to bolster our economic security in retirement. The latest edition of Get a Life by Ralph "Jake" Warner was published in 2005. The co-founder of Nolo.com, the self-help legal organization, rejects financial fearmongering and offers a good framework for thinking about how to construct a meaningful life in your next chapter.
Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."
