Getting Beyond Retirement Denial

03/15/2010 9:44 am EST


Terry Savage

Author, The Savage Truth on Money

It’s perfectly understandable that people don’t plan for retirement; it actually takes an incurable optimist to even contemplate it.

Just a few years ago, everyone was planning to “retire early.” Maybe that meant in your late fifties, or early sixties. Everyone had a dream of a second house, or a boat—and in the boom years the dreams looked within reach. But without doubt, most of those “planning” early retirement didn’t really have a plan.

That’s why I wrote two books about retirement planning, including the latest: The NEW Savage Number: How Much Money do you Really Need to Retire?

Now, finally, some people are willing to take the concept of retirement planning seriously. But far too many, judging by Howard Gold’s column last week, are still thinking: “We’ll figure it out when we get there.”

That’s a dangerous attitude—but then, misery loves company. And there will be plenty of company for boomers’ misery when they realize how costly retirement will be—and how much lower their standard of living will be in their senior years.

I think people secretly want to plan, but they are paralyzed when it comes to taking the first step.  They think that starting to plan for retirement is like walking into quicksand. They fear that a glimpse into the future will destroy their current happy oblivion. That’s how you get the statistics Howard quotes in his column.

The earlier you start planning, the easier it is. But it is never too late to begin. So, let me give you one Savage Truth and three easy steps to start you on your way. 

The Savage Truth is: Time is more valuable than money. Young adults have the most valuable gift of all: time. We boomers know it, now that our time is inevitably dwindling. Time leverages money. And it can still work for you, because you probably have more time than you realize.

That leads me to Step 1: How Long Will You Live?

Of course, no one can ever know that. But to do any serious planning, you should have a reasonable idea of your life expectancy. To figure it out, go to and take the quiz. This fascinating online tool will ask you lots of easy questions—including your current age, your parents’ age if they are living, or how old they were when they passed on, your siblings’ ages—and other obvious questions.

It gets tougher when they ask you how frequently you exercise, or eat green vegetables! They even want to know if you floss your teeth every day! (No joke: Gum disease has been linked to heart disease and stroke.)

When you’ve finished filling in the blanks, click to find out your projected life expectancy. You may be surprised. I was told I’d live to 104! Then I went back and was more honest about the exercise and vegetables, and got a more reasonable 96. Even so, that had huge implications for my planning.

Step 2: Get Your Number
This is easier than you might believe. Every financial services firm has a calculator on its Web site, but my favorite is, the Web site of the nonprofit Employee Benefits Research Institute (EBRI). On it there is a calculator called the “Ballpark Estimate.”

Set aside some time to work with this. You’ll fill in the amount of your current income, your age, and your hoped-for retirement age. They’ll also ask how much of your income you want to replace in retirement. Think about it. You may think you can live for less in retirement, because you won’t have commuting expenses or dry cleaning for your work clothes. But you will have higher medical expenses, and you may want to travel! I recommend trying to replace at least 80% of your pre-retirement income.

You’ll have other choices to make when you use this calculator. You’ll be asked about your current retirement savings balance, how much you are contributing, what returns you’ll expect, and your estimate of inflation’s impact.

When you finally click, you’ll see how much more you’ll need to save or how much lower your standard of living will be in retirement because you didn’t save more. 

Regularly saving a fixed amount is far more important than your investment returns. And time is the most important factor of all. Because if you delay retirement (if your job doesn’t retire you first), just a few more years of contributing and a few less years of withdrawing will have a huge impact.

Step 3: Get Trusted Advice

Find a mutual fund company, such as Fidelity, T. Rowe Price, or Vanguard that offers free or inexpensive modeling services not only for reaching your goals but for setting up a withdrawal plan.

Then, find a financial advisor (, or and be sure to check their references and ask how they are paid. Even if you’re a do-it-yourself type, it’s always good to have a second, unemotional expert review your decisions.

And finally: Don’t procrastinate. And don’t believe that the government will somehow find the money to take care of you. Not everyone will have an enjoyable retirement, but some will. It might as well be you.

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