Comment by catchfence

January 30, 2006 @ 1:08 am

Talked to the mother-in-law about their retirement plans this weekend. Not surprisingly–and a little unnerving to hear–they only started saving for retirement a couple years ago. And these are people in their mid-60s of very modest means. Her reply: “God will take care of us.”

When I told her I’d been reading your book and got my butt into Fidelity to make sure we’re on the right track, she looked at me with bemusement and said, “But, dear, you’re barely even 40. Don’t worry about retirement. We’ll take care of you–you can stay with us!” When they’re 90? Hm, not likely. Looks like we’ll be reevaluating our Number to include taking care of them.

Just wondering how many people have you spoken to who find themselves taking care of their parents/in-laws because the older generation didn’t plan appropriately?

Loving your book. Very motivating and inspirational for the average worker-bee.

Comment by ddanford

February 2, 2006 @ 11:07 am

As an investment advisor, I’ve been surprised by some early reviews of Lee’s book on Amazon.com; it strikes me that some readers went to this book seeking a concrete “answer” to their retirement issues. They wanted questionnaires, spreadsheets, calculators, and - finally - a concrete retirement number for their own situation.

Most of these things already exist and are readily available. These are the tools of financial planning and they can be found on any good financial website and/or shelves of a local library. Most competent advisors can prepare an extremely detailed report on these exact and other related issues. It’s not rocket science, and it’s not a secret technology.

What puzzles me is that some people don’t seem to appreciate the complexity involved, and, therefore, the folly of concrete answers. First of all, there are at least three huge retirement questions without advance data - 1) how long a specific individual will live, 2) the precise future performance of investments, and 3) the precise future rate of monetary inflation. Truthfully, these key points are monumental mathematical factors for determining anyone’s “number” and, yet, they simply can’t be known in advance. Add to these three the countless variables for each unique circumstance (including lifestyle and other factors discussed in the book) and the entire process grows necessarily vague. Almost any process that yields a concrete number is dangerously flawed.

Perhaps a better way to say this is that, while it’s possible to recreate an exact “number” upon a person’s date of death (by looking backwards), it’s impossible to accurately devise this same number anytime before that date.

Interestingly, this vagueness is at a peak as a person approaches retirement. People in their 50s and 60s must look towards two or three decades of potential lifespan. Small variances in investment performance or the inflation rate compound to make a huge difference over lengthy periods, so uncertainty plagues the early planning process. With each passing year, we replace one year’s financial estimates with hard (though historical) data. We also bring more certainty to the “lifespan” question (from X to X minus 1). Each year into retirement brings greater certainty to the complete planning process.

From all this, my conclusion is that the number changes throughout life, and actually becomes more certain in the furthest years of retirement. People seeking a concrete number are advised to revisit this subject often, and to make frequent adjustments. As a professional, two things seem very obvious to me … first, flexibility is a prime issue in achieving retirement success. The longer the likely time horizon, the more call for future adjustments (and the need for financial flexibility to make those adjustments). And, second, ongoing evaluation is critically important. A one-time retirement “plan” isn’t likely to yield lasting results. Any successful plan will require frequent revisions. Competent professional judgment can’t hurt, either.

These many complications will drive some people crazy. It’s not that “The Number” doesn’t address them; it’s that no book could fully address them. It’s just not a one-time thing. I think that’s an important part of his point.