The Savage Number: How Much Money Do You Really Need to Retire?

October 12, 2009 9:57:49 AM PDT
As Americans start to pick up the pieces after the stock market free-fall, people are more scared than ever, especially when it comes to retirement. Many are realizing that the future isn't going to be easy unless you plan. Enter Chicago's own, Terry Savage ( terrysavage.com), nationally known personal-finance expert and author of The New Savage Number: How Much Money Do You REALLY Need to Retire.

"Just as Americans were too optimistic about their retirement prospects a few years ago, I believe we have become far too pessimistic about the future," Savage says. "It is NOT 'game over' for America -- or for your retirement plans."

In her new book, Savage addresses many topics on Americans' minds when it comes to retiring. No matter what your age -- retirement is possible, she says.

The New Savage Number offers this advice:

  • Beware of "Generation Welfare": Boomers have the numbers and will be able to vote themselves the benefits. But the younger generations will rebel at paying the huge taxes necessary to support their parents' retirement. We need to solve this problem now!
  • Learn how to hedge against even a small amount of inflation using appropriate investments, such as gold and natural resources.
  • YES, you should keep investing in the stock market.
  • Reverse mortgages may be a 'saving grace'.
  • Long Term Care Insurance is a must -- especially for women!
  • And, YES, Boomers will still be able to retire.

"Keep in mind, it's never too late to plan!, But a realistic plan, may require a new definition of retirement," Savage says "What's important is that you have an honest view of what it might cost you (your Savage Number) to live in retirement, and a plan to either save and invest now, or adjust your lifestyle later."

Terry Savage talks about retirement

What's NEW about this book?
This book comes after the stock market crash and the recession -- at a time when people are more scared, yet more willing to think about the possibility of retirement. No longer do they naively believe that the stock market will automatically make them wealthy. And now they realize that their home won't be their savior either!

So in addition to updating the book with the new financial products that have been created in the past few years since the first edition, the NEW Savage Number takes advantage of this new, widespread awareness that the future isn't going to be easy, unless you plan.

What IS the Savage Number?
The actual "number" is different for everyone, for every family. It all depends on the lifestyle you want for your retirement. We've gotten so used to thinking about ever-rising standards of living. But retirement is a time to naturally cut back -- a little. Still, you'll live longer and need more money than you might imagine. And while you're not buying clothes for work or paying to commute, you will want to travel in that free time and you'll be paying more for healthcare.

You really need to do the work to calculate your Number -- and how to reach it. This book walks you through the process of deciding how much more you need to save each month to reach your Number.

Is this book only for people nearing retirement?
Oh no! This book is for everyone -- including those just starting out. Remember, time IS money. The sooner you start to save, and invest, the easier it will be to reach your number. I hope we won't have to wait to deal with this issue until the example of impoverished baby boomers hits the front pages.

Will the Baby Boom generation be able to retire? Will government solve the problem?
That's a tricky question. Yes, government can solve the problem of paying promised benefits -- but only if the economy is booming and bringing in tax revenues. If the economy is stagnant, then the only way the government can keep its promises about Medicare and Social Security is to "print" the money. And that would lead to unbearable inflation. (I show you how to hedge against even a small amount of inflation by using appropriate investments.)

What do you mean by "Generation Warfare"?
I think this will divide our country more than any issue since the North vs the South! Boomers have the numbers, and will be able to vote themselves the benefits. But the younger generations will rebel at paying the huge taxes necessary to support their parents' retirement. We need to solve this problem now!

The Stock Market crash has taken a real toll on retirement plans. Should you still invest?
Don't be shaken out of a realistic investment plan by your emotions. History shows that over the long run -- at least 20 years -- there has never been a 20-year period where you would have lost money in a diversified stock portfolio, with dividends reinvested! But most people are ruled by emotion -- Fear and Greed. That makes them sell out at the bottom, and buy blindly at the top. I spend a lot of time in this book explaining why the stock market offers you a long-run opportunity to grow your savings -- and why you should keep investing on a regular basis.

You write about Reverse Mortgages. Are they a good idea?
Reverse mortgages are a terrific idea -- and they may be the "saving grace" for many families who were wise enough to pay down their mortgages. With this product, they can withdraw money tax-free from their home for any purpose, and without the need to repay -- until they die or choose to sell their home. And they can never be forced out, or "run out of money." It's such a good idea that I did a Reverse Mortgage for my own father!

You have an entire section on Long Term Care Insurance. Is that "nursing home" insurance?
Not necessarily. It can be used for home health care or assisted living, as well. Look, nobody likes to think about needing care with basic activities like bathing and dressing. And our parents are living longer these days, in good health with all the medical advances ranging from new heart valves to new knees. But eventually, it's likely that we'll wear out. And it's going to be terribly expensive -- $8,000/month now -- to receive the kind of care you want for yourself or your parents. Long term care insurance is the way to protect against those devastating costs. And it's particularly a woman's issue, since we're likely to live longer!

If you're nearing retirement, is it too late to plan?
No, it's never too late. But a realistic plan might involve a new definition of "retirement." You may leave your full-time job, but if you haven't saved "enough" then you'll have to plan to keep earning some sort of income -- either consulting, or starting your own small business, or even taking care of your grandchildren and being paid for what you'd do out of love. What's important is that you have a realistic view of what it might cost you to live in retirement, and a realistic plan to either save and invest now, or adjust your lifestyle later.

About The Author

Terry Savage has financial expertise that comes from experience. She started her career as a stockbroker and became a founding member of, and the first woman trader on, the Chicago Board Options Exchange. Terry is nationally known expert on personal finance and is a regular TV investment and financial markets commentator. She is the nationally syndicated Chicago Sun-Times personal finance columnist, contributor to TheStreet.com, and author of three bestselling books.

Terry has won numerous awards, including the National Press Club Award, and received two Emmys for her television work.


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