The Number It haunts you. You hate talking about it. You hate thinking about it. But if you don't get a grip on it, you can kiss your retirement goodbye. It's...
By Lee Eisenberg

(FORTUNE Magazine) – Here's a social experiment I urge you to avoid if you harbor even the faintest hope of making new friends at parents' weekend. The social experiment has to do with research I'm doing for a book. The book is called The Number. It's about how much money is enough. It's about how many acorns you need to have squirreled away if you are to feel confident about living out your remaining decades in comfort and financial security. Oh, that.

The experiment is straightforward. There are three questions, posed to new acquaintances and old friends, nearly all of whom consider the queries off-putting. My test subjects are well-heeled men and women more or less at the midpoint of their lives. They are baby-boomers known to the financial services trade as HNWIs, or high-net-worth individuals. Admission standards for this club vary. Marketers grant HNWI status to those with net worth above $1 million, or to those with $500,000 in investable assets, or occasionally to anyone with a six-figure income. Meet one of these criteria, and money managers consider you a big fish. But are you a happy fish?

Early results of my experiment suggest HNWIs have one thing in common: They're worried. If they're still working, they're counting down what's left of their careers and recalculating retirement funds. If they've already retired, they're fretting about whether they bailed too soon. Each day, it seems, brings a body blow to their holdings. A left jab to their stocks, a right hook to their bonds.

For all their affluence, HNWIs are a tender lot. Before asking my questions, I try to corner the HNWI; a dinner with assigned seating or a crowded bar make for effective holding areas.

Once a test subject is suitably contained, I introduce question No. 1: "So. Tell me, how much money do you have in the bank? Just your liquid invested assets, please. Home equity doesn't count."

If the respondent doesn't scowl or flash a Christofle butter knife, I advance to the second question. "Do you think you have enough to get you through, say, the next 30 or 40 years in the style to which you're presently accustomed?"

Finally, unless the respondent has by now fled to an undisclosed location, I conclude the probe with a flurry of queries. "Assuming you don't think you have enough stashed away, what sacrifices are you prepared to make? Are you resigned to bequeathing your kids little more than the family bichon? Are you prepared to forgo a new car every three to four years, golf memberships, a Garland stove for that dream cabin on your Golden Pond?"

I can report that most people, rather than succumb to investigation of their Number, would prefer to conduct guided tours through their medicine cabinets, or provide detailed accounts of confidential sessions with their life coaches, or describe at length which frisky acts they'd be willing to perform--in Macy's window--with this or that man or woman, and with what leather accouterment.

When I bring up the Number with a powerful New York City literary agent, a no-nonsense negotiator, she begins to fiddle with the pencils on her desk.

An influential PR man in Chicago, adept at thinking actions through to their consequences, tells me he has decided to go back to work, exactly three weeks after announcing his retirement to his clients.

Over drinks in Manhattan, I open the subject with a couple I've known for years. They are among my closest pals. When he shows some inclination to divulge details of their holdings, she cuts him off with a brusque "Don't go there." I seem to have morphed into a stranger. "Some things are not meant to be shared," she says with bone-chilling finality.

Yet inside millions of us, whether we're lucky enough to be an HNWI or are just an OJ (Ordinary Joe), the Number looms silently large.

The Census Bureau tells us that by 2040 the population of Americans over 65 will double. The majority of these will look to Social Security as their main source of retirement income. That portends a major case of heartburn, not just for those who need the income but also for their children, my children, your children. And everybody's children's children. In a recent book, The Coming Generational Storm, economist Laurence Kotlikoff warns in dispiriting detail of the way Washington understates the future cost of providing Social Security benefits to the 77 million boomers who will be retired three decades from now. If the system isn't fixed, in Kotlikoff's opinion, we will expose future generations to "fiscal child abuse": higher taxes, higher inflation, and a lower standard of living.

Nobody, it seems, is watching out for the future needs of Ordinary Joes. But once you get a few rungs up the economic ladder, you begin to get a little respect, both from Washington tax cutters and from Wall Street, which wants a crack at cradling your nest egg. If your Number is $250,000 or more, you are part of a sprawling group the financial giants refer to as the "mass affluent." This designation is the next best thing to carrying an HNWI card. There are billions at stake in the battle to gain custody of the IRAs, mutual fund deposits, and equity portfolios belonging to the affluent mass of professionals who will be faced with reorganizing their finances for retirement. If you are Fidelity Investments, Vanguard Funds, or their competitors, getting those accounts to roll over in your direction is critical.

From the mass affluent it's but a few hard-won steps up to where we started. While near millionaires, or multimillionaires, are likely to win no sympathy from those below, they may sweat the future more than anyone else. After all, they've got more to lose, in both dollars and lifestyle. The clouds they see on the horizon are what the marketing team at Fidelity cites as the five key risks, any one of which can rain on an HNWI's second-half dream: inflation, misallocated assets (i.e., not enough stocks, according to conventional wisdom), excess withdrawals, rising health-care costs, and, ironically and ultimately, the risk of living too damn long. One respondent, whose girth betrays his epicurean enthusiasms, told me his private financial plan calls for hedging the longevity risk. How? "Through the insatiable consumption of pork products."

So ask yourself in the privacy of your home: Assuming you eat right and take your statins, what do you think your household will need to attain your own level of comfort through the next 40 years? A half-million? A million? Two million? Twenty? There is, of course, no single correct answer. Your Number depends on how you choose to live. One man's Taurus SE is another's BMW 745Li.

Whatever your Number, it is likely to lead you around by your nose. It may keep you clinging stubbornly to a job, or it might induce you to uproot your family in hopes of a big, late-inning rally. The Number could well cause you to make dumb investment decisions. (For detailed instructions, see David Denby's American Sucker, an object lesson in Number-envy gone haywire.)

How did everyone get so numb and numbered? And why weren't we worrying about our second-half fate ten years ago, or back when we picked our college majors? What better time to have laid a foundation for adequate "lifetime income" (a common buzz term these days) now that boomers are exiting their "accumulation phase." The easy answer is that baby-boomers have long taken it on faith that they would live better than their parents. So from the moment they registered their first credit cards they--no news here--spent big and saved little.

During the late great boom, experts opined that the savings decline had to do with the wealth effect triggered by the ever-rising stock market. They advanced the notion that the mere illusion of riches burned a bigger hole in people's pockets. That theory has proved shortsighted. During the 2000--03 market slump the wealth effect evaporated, and yet consumer-spending and personal-debt levels marched merrily uphill. Thanks to low interest rates, Americans took on 50% more mortgage debt over those past three years, a hefty portion of which came in the form of adjustable-rate products that will eventually ratchet upward.

Anyone for a trip to Tarzhay?

Most of us respond to Number funk in a time-honored way. We work the mall. We bury our worries about the long term under shopping bags full of short-term goodies. Grossly indulgent purchases seem soothingly affordable when we consider that the giant-screen plasma TV is the equivalent of barely a month's rent at a nursing home. Most of us can't or won't imagine a nursing home in our future. Yet one recent study projected that about one of every two Americans now turning 65 will spend some time in such a place, with many serving at least a six-month sentence. The annual cost (in today's prices) is between $33,000 and $91,000 a year.

My experiment has revealed multiple instances of how we fail to connect the dots between the way we live today and the needs of tomorrow. Ask yourself how much the perks of your job enhance your day-to-day lifestyle. What will happen to how you eat, drink, and travel when the paychecks stop coming?

This question comes up frequently in conversations with financial planners. Two I've spoken to are quick to raise the specter of Lifestyle Relapse when they sit down with clients to discuss impending retirement plans. Tim Christen is CEO of Virchow Krause, a financial services firm in Madison. Over Cobb salads at his hushed downtown luncheon club, the affable Christen explains that executives don't fully appreciate how expense-account living adds to their perceived quality of lifestyle. The 45-year-old Christen is a case in point. His daily calendar calls for lots of reimbursable meals and travel, including trips to seminars and forums around the country, some at choice venues such as the Ritz-Carlton in Naples, Fla. Christen really likes staying at the Ritz and is grateful to be a full-time resident of Expense-Account City. "You know, I can't remember the last time I entertained anyone personally," he says. "Just about every check I pick up is a true business expense."

Not long after my meeting with Christen, I call on an investment advisor in Chicago. Brien O'Brien is chairman of Advisory Research Inc., a management firm with more than $3 billion under its wing, including the investment portfolios of major foundations, corporations, and extremely wealthy individuals. On the question of helping clients create investment plans to avoid post-career Lifestyle Relapse, O'Brien cites an example of the gent who sells a business, then seeks a portfolio designed to yield the same living standard enjoyed while he was still in the saddle. The investment portfolio needs to replace the owner's salary as well as expenses that have been charged off to the firm--a chunk of travel and entertainment and certain tax-prep and financial-planning fees, for example. "Say a person has $50,000 worth of business-covered expenses every year, which is conservative for many business owners," O'Brien explains. "And say that after he sells his business he wants to live his life exactly as before. Which is only reasonable. Well, using very conservative investment assumptions, he'll need to add a million dollars of liquid assets to his Number just to generate the $50,000 needed to keep his lifestyle at the level it was. Think of it, $1 million just to stay even."

So ask yourself: When it comes to living out the second half, are your dreams bigger than your wallet? What will it take to buy that rambling house with a hammock, a shady porch, and trout breaking the surface in the midst of a snowfall of mayflies? Will you survive the five key risks and wind up with grandchildren nestled on your lap by a fire, in a room that smells of cedar rafters and cinnamon sticks?

Until the market did its backflip four years ago, affluent boomers could at least dream such American dreams, whether they had enough money at that point or not. For one thing, there was always the prospect of an inheritance to bail them out. But parents now routinely live to be 80, 90, or beyond. Estates once seen as backup college funds or a ticket out of a dead-end career are being drawn down to pay for nursing care, physical therapy, and assisted living. Indeed, for boomers the skies are gray all the way to the horizon. It was just five years ago that we were amused by books such as David Brooks's Bobos in Paradise, which depicted a generation facing daily challenges no greater than finding the right cabinet pulls at Restoration Hardware. Today we dive for comfort under our fraying Frette Hotel Collection sheets. Global terror, a jumpy stock market, and soaring health-care costs are threatening the putative Paradise of the late 1990s.

Brooks and others had a winning way of describing how we wallow in good taste and design. But they offered few insights into the consequences. Enter The Millionaire Next Door and the cottage industry it spawned. Published in 1996, Millionaire is dedicated to the proposition that any Tom, Dick, or Harry can reach a seven-figure Number if he only understands, duh, the simple math of cash flow. The road to riches, well, it's pretty darn straight, say the authors. Just because Range Rovers and Rolexes are nice doesn't mean they're necessary. Most millionaires know that, which is why they remain millionaires. They sock away money through determined saving and because they're content to live in split-levels sheathed in aluminum siding.

But how many HNWIs are willing to sink so low in deference to their second-half dreams? How many are prepared to sell the McMansion, load their home equity into the trunk of an old Volvo, and head straight downscale--if not all the way to austerity, then at least to serious modesty?

Yet baby-boomers are nothing if not adept at moving mountain, culture, and marketplace to suit their changing needs and whims.

So welcome to the Reasonably Affordable, Post-Career Lifestyle of Tomorrow. You're 55, or 62, or 67. Your Number comes up short. Or rosy, for that matter. What do you do? Keep working, most likely.

Today there are millions who have postponed puttering in the sunshine, even if they can afford to leave the office behind. These are energetic people for whom unemployment would be dulling in the extreme. "Retirement as we knew it went out with the last century," says Larry Cohen of SRI Consulting Business Intelligence. He refers to that time-honored stretch of vegification punctuated by occasional bursts of golf, paid for by ladders of CDs deposited at the local SunTrust. Cohen is one of many researchers who slice and dice that Life Passage Formerly Known as Retirement into distinct, multiple late-life stages. Once a career ends, more people will enter what Cohen refers to as Revolving Retirement, formerly known as semiretirement. That is further linguistic evidence of how we will sugar-coat the fact that we can't afford to--nor even want to--retire to play golf till our heads are brown as walnuts. Revolving Retirement will give us some time for golf but will also provide crucial supplemental income: a part-time job, a consulting gig, franchise ownership. Those post-career vocations will allow income to keep flowing, which in turn will give us a chance to run out our clocks before we run out of principal.

More profoundly, the Affordable Lifestyle of Tomorrow will also spark a revival in a dormant value or two.

Remember when Small was Beautiful? Get ready for its second coming.

The prophecy crystallized one afternoon following lunch with a New York marketing honcho. I'd just released him from his Number interrogation when he told me a story. It was about his uncle, a blue-collar worker from the Midwest who diligently raised eight children on modest wages. The uncle was nothing close to an HNWI. But that didn't stop him from taking an inspired detour from the well-traveled road his friends were on. He decided not to retire to a patch of hardscrabble in Florida. Instead he bought a cozy one-room schoolhouse on the coast of Ireland.

That man was a visionary. He knew contentment could be extracted from a salty breeze and a glorious setting. His little schoolhouse provided joy that rendered expensive amenities--no Garland stove for him--beside the point. So, prodigals, take heed. If your expectations outstretch your Number, it needn't come down to how much stuff you can cram between four walls. It should come down to how much satisfaction you can wring out of how little you wind up with. Or as that noted gerontological anthropologist Sheryl Crow put it, "It's not having what you want. It's wanting what you've got."

Take a whack at a final puffball of a question: Are custom dental moldings and personalized golf carts really the keys to a long and happy rest-of-your-life?

And if they're not, what is?

Lee Eisenberg is currently at work on a book called The Number, about the price of second-half dreams, to be published in fall 2005. Eisenberg's quest for his own Number has taken him from the world of magazines, where he was editor-in-chief of Esquire, to, most recently, Lands' End, where he was executive vice president and creative director.