Hey babe, what’s your number? The Big Secret of retirement planning

This is the question that has been floating around me, in the air, over the last few months. People ask me this question, they tell me they lie awake contemplating it, and they want to know if I know the answer: how much money do they need to save for retirement?

What is the exact number of dollars they need to have socked away in retirement savings accounts to fund a post-work life that works?

A life that includes some luxuries, some long-hoped-for travel or the freedom to immerse themselves in a favourite hobby, while ensuring the kids (if there are kids) are fed and educated and set up well for their own lives; the needs of the partner (if there is a partner) are handled; and some money is set aside for emergencies, caring for aging parents, and their own health and housing and basic other needs: what is the number of dollars that can fund all that?

Sometimes people underscore how much they want to know just that one thing, and nothing else. “Only when we know the answer to that primary question does it make sense to discuss anything else,” said one prospect who knocked on my office door.

There’s even a book about this question: The Number, by Lee Eisenberg. (He used to edit Esquire magazine and then he worked for Lands’ End, the casual clothing retailer. As a result, I think, this book reads kind of like an upscale catalogue of retirement planning — very genteel and corduroyed –  but I digress.)

Everyone’s Number is different, Eisenberg says, though his book is not designed as a financial guide. Instead, it provides an glimpse into our generation’s retirement worries.

But the question “What’s my number?” is, in my opinion, not a very helpful way to approach the issue of planning for retirement. Here’s why: there is no good and quick answer to the Number Question. (Maybe that’s why Eisenberg’s book focusses on the question, and not on the answer.)

Even if there was one identifiable number for you, it would be based on a pyramid of assumptions. Any of those assumptions change sufficiently and the number at the top comes tumbling down, like when your kid pulls the bottom orange out of the neat stack at the supermarket. And, of course, your number changes yearly, as you get one year closer to retirement.

I suspect that the prominence of the Number Question goes some way to explaining why so many Canadians don’t adequately prepare financially for their own retirement: we are looking for speedy and simple answers that don’t exist.

So, if the answer to the question, “what’s my number?” won’t empower you, what will?

Here’s what I think: what will make a difference for you in planning for the rest of your life after work is a realistic, grounded, viable and robust retirement plan.

Not a single number conjured up like a magic bullet, and not a rationale for why you should buy more of Mutual Fund X. A plan constructed from individual pieces that you can take apart, and get a look at, and learn about, and replace if necessary.

A viable retirement plan will include factors that are personal to you, and assumptions that are more technical and universal. Personal factors should include:

• your life expectancy - for how many years will income be required in retirement?

• your current savings, and how they are invested

• your anticipated retirement income from public and private pensions

• your expected savings from now to retirement

• your expected spending in retirement

Together with more universal assumptions such as the expected rate of inflation and tax rates, the answers to those questions can be used to generate a plan to get you from here (wherever you are now) to there (a life in retirement that works for you).

You may need to adjust some of your expectations or your behaviour in order to balance your current lifestyle with your lifestyle in retirement, but having a plan in place allows you to make choices now that empower you later. Which is a good thing, I think.

Does everyone need a retirement plan? Maybe not. But the financial world we face is not the ones our parents operated in. We, as a group, are grappling with a world of shrinking pensions and more personal responsibility for funding our own retirement; increased life expectancy coupled with less savings and more debt; and much more complicated financial products than
even 20 or 30 years ago.

So: if you are one of those people who tells me they can’t sleep at night because they are worried about their Number; if you are someone who feels like she has this part of her life handled (”My spouse has a good pension, and I have some savings”) but deals with creeping doubts about whether her plans are workable; if you find yourself thinking “I’ll deal with that
later!” but know that delaying may be foreclosing on some of your planning opportunities - if you see yourself in one of those groups, pull up a chair.

Book some time with yourself, your spouse, or your financial advisor to start the conversation. The Big Secret of retirement planning is that you can do this. You’ve handled everything else you’ve encountered so far in life, and you can master this too! And we’ll help you along the way.

A version of this article was originally publised at The Best Kept Secret: Toronto’s Resource for Women 40+.