Target practice

Ecology of Money

Four Keys to a Sustainable Retirement Plan
By John F. Wasik | 03-23-10 | 10:30 AM | E-mail Article

Every year I read the annual Retirement Confidence Survey, published by the non-profit Employee Benefit Research Institute (www.ebri.org), and promptly ignore it. Not this year.

I'm such a trend geek that I've been following the survey for the past 20 years of its existence. Most of the time it tells me what I already know: Most people have some retirement savings, but not enough. Most have an idea when they want to start looking for early-bird specials at local restaurants and want to travel much more than they are now.

This year, though, I saw something different and potentially disturbing. While it was no surprise to me that millions will be retiring later than they hoped, the implications are troubling.

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.

By Humberto Cruz

I keep the family financial records current and organized. Still, it took me nearly two hours to find and enter the copious and detailed information requested by the financial planning software I just tried.

It was by far the most exhaustive and at times exhausting personal finance program I’ve used. But it was also the most thorough, earning my faith and respect.

The program I used is developed by Economic Security Planning, Inc., a company headed by Laurence J. Kotlikoff, professor of economics at Boston University.

Unlike other programs that merely ask a few quick questions, ESPlanner software doesn’t assume we will spend a set percentage of our pre-retirement income in retirement.

Economist Laurence Kotlikoff wants financial planners to get new tools.

By ELLEN UZELAC

For years, Boston University economics professor Larry Kotlikoff has advocated for consumption smoothing — essentially creating a sustainable living standard that “smooths” out over a person’s lifetime. He’s even created a software solution that gets the job done.

But the advisory community has overall ignored the economist’s top counsel: that economics-based planning replace traditional financial planning. That could be changing.

Sunday, May 3, 2009

by Jay Fitzgerald

Maybe there’s a different way to approach retirement - and a Boston University economist thinks he’s found it.

After the beating 401(k)s and IRA accounts took last year, Laurence Kotlikoff said that maybe Americans have finally realized they can’t count on saving enough money before retirement.

As a result, his company, Economic Security Planner, last month launched a free online software product that he says will help consumers analyze and prioritize their current income and spending patterns.

The goal for consumers should be to “smooth out their living standards,” both before and after retirement, so that there’s no jolt during a transition from work to the Golden Years, he said.

The plan sounds an awful lot like standard financial planning.

by Laura Rowley

February 15, 2007

Conventional wisdom suggests that people are woefully unprepared for retirement. Study after study portrays most Americans as the proverbial grasshoppers, playing the fiddle with their finances while a minority of conscientious ants store up supplies for their golden years.

In 2004, for example, the Center for Retirement Studies at Boston College estimated that 43 percent of working households were in danger of having too little income to fund their retirement, even after tapping home equity.

Singing a Different Tune

Don't stop now
Studies showing retirees may have saved more than needed aren't likely to apply to baby boomers

by Teresa McUsic

The Savvy Consumer

Just how much should you be saving for your retirement?

Several economics professors have suggested in recent studies and newspaper articles that some Americans are, in fact, saving too much.

But others say that doesn't apply to Baby Boomers, who like to spend more than their parents did.

by PAUL B. FARRELL

Start living for today, stop wasting all those management fees

Mar 5, 2007

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, you're saving too much for retirement. But isn't that counterintuitive in today's uncertain world, where more is never enough? No, because there's some powerful new research to prove it.

Yeah, I know, you're going to insist on telling me why you really need a million bucks invested at 6% to generate $60,000 annual cash flow in retirement. But I already know why: Because that's what all those fancy online financial calculators tell you, right?

by Sandra Block

March 8, 2007

Go ahead and buy that big-screen TV. Enjoy your daily latte. Book your dream vacation. When it's time to retire, you'll be just fine.

That's the view of a maverick group of academics and economists, who contend a significant number of upper-income Americans are being hoodwinked by the financial services industry into saving more than they'll actually need to retire comfortably. In the process, these critics have sparked a brawl rarely seen in the buttoned-down retirement planning business.

Sunday, April 29, 2007

by Patricia Sabatini

It's a ubiquitous and alarming admonition: Americans are in miserable shape when it comes to saving for retirement.

As told by a barrage of grim studies and surveys, a majority of workers are destined to fall far short of what they'll need to maintain a comfortable lifestyle in retirement. Worse yet, many simply won't be able to afford to quit working, stuck behind the register at Wal-Mart well into old age as a way to make ends meet.

It's considered conventional wisdom, taken like gospel.