JANE BRYANT QUINN

Figuring needs for retirement can be difficult.

THE WASHINGTON POST

NEW YORK -- Are you saving enough to retire? Most of us don't have a clue. You hear amazing figures, like $1 million or more, and it probably depresses you.

Fortunately, you won't need that much, unless you're feeding country club tastes. Just ask the retirees around you. They're sitting comfortably in the middle class on savings of considerably less.

So where does that famous $1 million estimate come from? To flnd out, my associate, Temma Ehrenfeld, 36, put her finances on the line. She visited a random group of retirement planners, who ran her data -- salary, vested pension, 401(k) plan and other savings -- through their computer programs.

The results show an industry whose computers might as well be slot machines. She got wildly different answers, based on assumptions that weren't always relevant to her life.

She did discover why some planners say you need $1 million. They assume that you're financing your retirement solely out of personal savings, with zero payments from Social Security or employee benefits -- which, to me, is irresponsible.

You might want to test a retirement projection with and without future employer contributions, just in case you're fired tomorrow. But most of the "experts" Temma saw dismissed her benefits out of hand. That had the handy effect of requiring her to save extra money, which the experts would be happy to manage for her.

Here's what they had to say:

1. What Hank said:
   Hank, a financial planner, has a "fee-only" practice -- charging fees for his time in lieu of taking sales commissions. Temma found him by calling the International Association of Financial Planners in Atlanta, which sends out free biographical data on planners in your area. They talked for an hour and a half, at $125 an hour.

   Hank concluded that Temma did indeed need the famous $1 million to retire at 65. To get it, he said she'd need to invest an additional $1,400 a year, on top of what she's saving now. But his calculation ignored her company pension, the money her employer adds to her 401(k) and her Social Security. Benefits like these are what most Americans retire on.

2. What Harold said:
   Harold, of Salomon Smith Barney, thought Temma should retire at 60 and at a higher standard of living than she has now. His projections counted Social Security, made a rough (inaccurate) entry for future 401(k) contributions and -- voila! -- produced a $1.5 million retirement "need."

   Harold was hungrier than Hank. His computer told Temma that she ought to save an extra $13,000 a year -- in his firm's IRA, of course, not in her company 401(k).

3. What John said:
   John, of Morgan Stanley Dean Witter, advised Temma to treat her 401(k) as "gravy" and figure her retirement without it. His computer put her savings target at $650,000, if she quit at 65 -- a sum attainable, he said, by investing an extra $1,300 a year.

4. What Mike said:
   What Mike said: Mike is an in surance agent for Guardian Life Insurance. Temma found him by following up on a Guardian ad for financial plans. She told Mike she didn't want insurance (she's single, with no dependents). He assured her that he also offered "traditional planning."

   Why am I not surprised at what happened next? Mike "proved" that 401(k)s were a waste by greatly inflating the tax she'd owe when she took the money out. Most people, he said, should ditch these plans and put their money into -- yes -- a life insurance policy, instead. Mike made no effort to estimate what Temma would need to retire on. He called his service "Personal Financial Engineering." I call it garbage.

5. What Tom said:
   Tom, of Merrill Lynch, ran Temma through a computerized plan costing $175. It covered all her potential future in come, including employee benefits. Tom concluded that Temma is already saving enough to retire at 65.

6. What two mutual funds said:
   Vanguard and T. Rowe Price put Temma's data through their computerized retirement planners. Their projections differed substantially, but both showed that she is saving enough.

7. What a trusted planner said:
   The late John Allen of Arvada Colorado -- whose computer I'd follow anywhere -- died suddenly while working with Temma, and is much mourned. He'd concluded that she's saving more than she has to, and could quit before 65.

With four projections essentially in agreement, that's probably the answer.

Grant MacLaren comments:
So, here we have yet many more examples of why you should become your own financial planner, never trust an insurance salesman for investment advice, and turn to the best no-load mutual fund companies for the foundation of your retirement portfolio!