Secondary menu

The Number: Retirement Planning Gone Wrong

Economics-Based Planning
The Number: Retirement Planning Gone Wrong
Laurence J. Kotlikoff, 01.22.10, 12:50 PM ET

"What's your number?" This is the standard question posed by conventional financial planning which asks, in essence, "How much money do you need to retire?"

But it makes no sense to me or other economists I know. When asked this question, my immediate response is "$1 trillion." I figure that will get me by. But then I realize that hitting that target would be rather tough--actually, downright impossible.

On the other hand, if push came to shove, I could live on the street and panhandle, so maybe $0 is all I really need in retirement assets. But that's not right either. I don't want to splurge now and starve later. Nor do I want to starve now and splurge tomorrow. What I really want is a smooth living standard over time. That's what we economists call consumption smoothing.

Syndicate content