Best for Last Retirement might be easy, but it's not free--it takes some serious saving. How much exactly? That's the million-dollar question.
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Plenty of personal finance books are published each year, andmost fail to gain much traction--which is fine, since the bestfinancial advice tends to be boring old stuff you've been toldbefore anyway. Former Lands' End Inc. executive Lee Eisenberg,though, broke through the din this year with The Number: ACompletely Different Way to Think About the Rest of Your Life.The book's central conceit is a question: How much, exactly, doyou need in retirement savings before you can quit your day job?Entrepreneurs pondering early retirement might be interested in theanswer.
To be fair, Eisenberg spends most of his nearly 300 pagesattempting to convince readers that The Number should be thestarting point--rather than the end goal--of any retirement plan.And he's right that the most fundamental thing is to thinkabout the kind of retirement you really want to have: The amount ofretirement savings you'll need varies according to the answer.But Eisenberg and others can say that till they're blue in theface. What people really want to know, and the one thingthey'll remember, is their number.
So how do you calculate yours? The best way is to see a fee-onlyfinancial planner and have him or her draw up a strategy for you.At the other end of the spectrum, you can go online to any of thedozens of good retirement calculators, such as the "ballparkestimate". The middle option is to take a prefabworksheet--online or otherwise--and spend some time with it. Checkout the embedded assumptions, and come up with a custom fit thatmatches your circumstances. Are 3 percent annual returns duringretirement too small for your portfolio? Tweak it. The actuarialtables don't match your family's typical life expectancy?Adjust that, too. Withdrawing 4 percent a year sound tooaggressive? Reduce it.
What you shouldn't do is make all your assumptions best-casescenarios so that the likelihood of them all working out is low. Beconservative, give it your best shot, and take it for what it is.Remember, it's only a number.
