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WHAT'S YOUR NUMBER

THE BALTIMORE SUN

Gael Miller is fairly sure $2 million will bankroll "a modest, not movie star" existence.

Steve O'Donnell wavers between his "realistic" $1 million and his "fantasy" $4 million.

Then there's Francis McAndrews, who says a cool $2.5 million should do it.

The digits differ, but the dreams are the same: to accumulate a pot of dough large enough to live on comfortably after retirement.

It used to be called your "life's savings." Then it became your "nest egg." These days, it's simply known as The Number, or what Lee Eisenberg describes in his recently released and buzzed-about book of that title: How much money do you have to save before you can safely retire? As millions of baby boomers approach retirement age -- and Americans of all ages see company pension plans vanishing or being frozen and Social Security diminishing as a safety net -- The Number has become something of an obsession.

"Over the last two and a half decades, there has been a sea change," Eisenberg said. "A large part of my book is devoted to what I call the old part of your life, in which we relied on pensions and the Social Security system, and the new rest of your life, in which we are asked to be the captains of our own ship. It's coming at a time when it's just dawned on people that there is nobody else out there reliable enough to take care of us in our old age.

"We can no longer hide from the reality that we're going to have to do this ourselves."

The Number taps into a growing undercurrent of fear over the future: As people live longer, and everything from health care to energy to housing seems to cost more, how will they afford to live once they stop working?

"It's such a huge amount to think about now," says Miller, 31, a Baltimore financial analyst who started saving for the future three years ago. "That number has to last you at least 20 years. It's got to figure in your health and spending habits and how much prescription drugs will cost you. There are so many variables. I'm skeptical that I'll be able to retire by 65, but the way things are going, it'll be more like 68 if I'm lucky.

"It's overwhelming to think about it," Miller says. "It's scary."

Being in the financial sector, though, forces her to think about it, for herself and her clients. But they might be in the minority, according to several surveys.

According to Eisenberg's book, 40 percent of those asked say they are saving nothing for the future, and those who do save put aside barely a penny out of every dollar they earned.

A 2005 Retirement Confidence Survey found that 55 percent of workers say they are behind schedule in saving for their life after work because of everyday living expenses, according to the nonprofit Washington-based Employee Benefit Research Institute.

Despite falling behind on savings, 66 percent still believe they will reach their savings goal by retirement even though most haven't even tried calculating how much money they will need when they stop working, EBRI says. The group calls this discrepancy "false confidence."

Money burns a hole ...

Blame that misplaced optimism on the age of instant gratification and easy credit. These days, many would just as soon deny themselves food than live without that $1,095 Prada leather shoulder bag or that $2,799.99 Philips 42-inch, high-definition plasma TV.

But for people like Darrell Burnette, a 39-year-old Washington pharmaceutical rep, that approaching big 4-0 birthday and a job change seven months ago have forced retirement worries into the forefront.

"I'm not really good at just taking money out of my paycheck and putting it aside, but it's become more important as I get closer to 40," Burnette says. "It's made me more focused now than I've ever been. No more shopping sprees, that's for sure."

A company pension plan, investments in personal stocks and signing up recently for a 401(k) savings plan has helped ease some of his concerns, but his one-time goal of retiring in his 50s now seems unlikely -- especially since Burnette would like to travel everywhere he's never been before and anywhere warm when he stops working.

"I've been getting rid of a lot of unnecessary debt, which I hope to finish [paying off] by the end of the year," Burnette says. "I want to buy a house. I haven't really thought about a specific number, but I have thought more about the age I want to retire. How much would it take? $100,000 a year? I don't know."

His 32-year-old colleague, Francis McAndrews, started thinking about his own number years ago and started saving when he realized he and his wife, Jennifer, 33, would like to retire by their mid- to late-50s.

Preparing for the day when he can coach lacrosse and travel occasionally, McAndrews contributes 15 percent of his pre-tax earnings into a 401(k), participates in the company stock purchase program and invests all his bonus commissions and his wife's earnings as a substitute teacher into stocks with the help of a financial adviser.

Start saving now

"I think people who have a goal in mind understand that you have to save now," says McAndrews, who says he's tried to factor in the needs of his 2-year-old son, upgrading into a new house after selling his current home in Annapolis, the possibility of having another child, health care costs and any unexpected problems. "I figure I need to make $250,000 a year for the rest of my life. That's the magic number I think, but who knows? That number could change. I've got a lot to accomplish before then."

For that reason, he works hard now: He spends his early mornings meeting with doctors. He sets up dinner programs with guest speakers so that doctors learn more about his company's drugs. He attends management development classes to help him outsell his colleagues.

"Retirement is all on you," McAndrews says. "I can't depend on Social Security. Nobody's going to be there to take care of me when I'm 65."

It seemed easier before.

Live modestly, sock away some pay each week and then live off a nice company pension and Social Security in sunny Boca Raton, Fla. But then pensions began disappearing like puffs of smoke at companies like Bethlehem Steel and US Airways. Social Security seemed to become much less secure. A sputtering economy, rising health care costs and rising consumer prices added to the anxiety.

Americans have never been more aware about the need to save for retirement, financial planners say, even as they struggle against spending every cent as they earn it. Some planners, though, don't believe the future can hinge on a single number.

Many contingencies

"As a certified financial planner, I've been doing this for 26 years and I can say there is no magic number," says Patrick J. Horan, president and chief executive of Horan Capital Management in Towson. "Health care is not consistent. Spending is not consistent. Health is not consistent. Reducing it to one finite number is impossible. That's like trying to take a single bullet and hitting eight different targets at once. The one thing I can guarantee is that any number you can come up with is likely to be wrong."

Eisenberg agrees that fixating on one number is unwise. He says to answer the questions, "How much do you need?" one must ask another question.

"'What do I really want out of my remaining decades?'" he said. "Until you can answer that what-for question -- which changes and shifts over time -- it's really hard to do a truly viable plan for the future."

The far bigger problem, however, is that few are saving enough, planners say.

"If you look around, a lot of metropolitan people are living really well for the most part," says Annette Simon, a principal in Bethesda-based Mosaic Wealth Management and a member of the National Association of Personal Financial Advisors (NAPFA). "But the better the lifestyle looks, when you look behind the curtain, oftentimes, there's not a lot there supporting it. In reality, they're probably living with huge amounts of debt."

Working retirees

"I think people will find they will probably need to continue working after retirement to supplement what they put away, if they put away anything," Simon says. "People are fairly unrealistic about what they think they can live on."

Part of the problem, planners say, is that thinking about retirement forces people to probe deep into hopes, dreams and desires that can be 20 to 30 years off.

Take the questions that clients at Chicago-based Leonetti & Associates Inc. are encouraged to answer for retirement planning purposes: What have you always wanted but never gotten? Assuming you had only one year to live and you didn't want to spend it traveling, what would you do? Why can't you do it now? Do you have a will and letter of instruction? How would you feel if you were left to handle your household finances?

Ellen Weiss, who works at Leonetti, says, "These sheets caused a row at my house. I learned that my husband's ideal retirement centered on living in the wilds of the Wisconsin woods, off the power grid. That was somewhat dissimilar from the two-bedroom, high-rise condo in the city that I had in mind. Yow! We'll work it out over the next 23 years -- at least we started to talk about a compromise."

Setting realistic goals, planners say, is the first step toward planning wisely for the future.

But there's no need to tell someone like Steve O'Donnell the importance of saving. Sitting at the Towson Town Center food court on a recent Monday, the elevator apprentice from York, Pa., was chatting about all the savings plans available to him with colleague Landon Brown, 34, an elevator mechanic from Edgewater.

Taking steps

O'Donnell checked off a company pension, which gives him $90 toward retirement for every 1,700 hours worked; a credit union, which is where he began saving money a year ago for emergencies; an employee annuity plan, which his company began contributing to 3 1/2 years ago; and a 401(k) savings plan, which he planned to sign up for later that day. With his wife's savings from working for a major fast-food corporation, O'Donnell is hopeful that they're on the right track.

"I haven't figured it out yet," says O'Donnell, 48, who has been with the elevator company for four years. "I wish I had started saving when I was 21, but I can't think about it too much."

Upon sailing away into the sunset, O'Donnell hasn't decided on whether he wants to continue living in Pennsylvania or sell the house and move to Myrtle Beach. He wants all his bills to be paid. He wants to relax in Jamaica once in awhile and go scuba diving in Cancun on occasion. He doesn't want to work past 60.

Will he make his number?

"Probably not," O'Donnell says. "I'm going to have to hit the Big Game to retire comfortably."

dan.thanh.dang@baltsun.com

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