This Mr. Smith Didn’t Go To Washington

Upon reading the daily haranguing that's become popular financial press, I frequently quip to Lara Hoffmans (you'll know her as an editor and columnist at MarketMinder, and longtime co-author with Ken Fisher), "We're always gonna have jobs—people need our help." That's not because we're so condescending and pompous—it's just that the financial world is so full of pitfalls. Straight talk and real help is hard to come by. In the investing business, daily we see all manner of bizarre strategies for retirement and savings, and it's a sad thing to see what someone's wealth might have been only if…

Take the concept of "the number." It's simply mind-bending how many books, inane television commercials, and fee-sucking dumb products exist to "help" people find the exact number a person or family must earn to be comfortable for the rest of their lives. The sheer quantity of different methods betrays the fact that few have figured this out, and answers aren't so cut and dried.

For years I've struggled to find a book on this topic to recommend in good faith. The landscape is so chock full of false gurus and tautological aphorisms. But Lee Eisenberg's The Number: What Do You Need for the Rest of Your Life and What Will It Cost? is an excellent, if sometimes a bit shallow and snarky, first place to start.

Instead of saying "let me tell you how to do this," Eisenberg takes a meditative approach, in each chapter laying out the landscape of issues people face when thinking about retirement and savings. One of the first things he says is "the number" isn't easy to calculate; it's highly qualitative and subjective, and will change over time as people change over time. This rhetorical mode allows Eisenberg to not only inform readers of the most salient issues, but also to bust prevalent myths and take a critical eye to accepted wisdom. Eisenberg even says he recognizes people don't want to think about this stuff, they just want the "formula" for finding the number, but he won't go there.

Essentially, there can't be a formula because folks have different goals. The "number" isn't about hitting some magical threshold, it's about knowing one's goals, understanding thoroughly what it will take to get there, and the risks involved. The real game is understanding how much risk you're really willing to take to hit your goals. Some will claim otherwise in this industry, but the simple fact is the risk/reward relationship will always be relevant when it comes to investing, short- or long-term.

The longest chapters of The Number, and the front part of the book, deal with the most important topics in thinking about money and longevity: Lifespan and the potential to outlive your assets (you'll likely live longer than you think), the corrosive long-term effects of inflation (healthcare costs will only become more onerous), and the importance of not over-diversifying or holding assets that won't get you to your goals. The book pays relatively less attention to the actual moment a person retires, which is right. Retirement is a momentous event in a person's life, but it isn't necessarily a pivot point for changing investment plans and allocations—yet even professionals get this wrong all the time. My sense is that's because, in the sales-driven world of retail investing, people are thinking about their financial plans at the time of retirement, and therefore it's an opportunity to sell products, reap commissions, etc.

The book's weakness is its analysis of investments. There isn't enough on pitfalls and traps of annuities and other poor investment vehicles save a John Bogle-esque warning about paying too many fees (which is, of course, good advice). Nothing on appropriate tax vehicles, the technical aspects of the investing/saving process, or the tradeoffs of various stock/bond/cash allocations—it's just not the aim of this book.

Usually the territory of huge blowhardedness, Eisenberg tackles the issue of money and meaning with aplomb. He uses the developmental psychological work of Carl Jung to describe how folks tend to view money as they mature and how those values tend to shift. (Jung is indeed quite good for this, and it warmed my heart to see Eisenberg recommend The Portable Jung, which was edited by the great Joseph Campbell. But a better book on the psychological issues of aging is James Hillman's The Force of Character. Hillman is also of Jungian bent but more nuanced.)

Best of all? The Number was published in 2006 and is now in most bookstore bargain bins. Pick this one up for a song if you see it. Eisenberg hasn't created a skeleton's key for savings and retirement (it can't be done), but this is excellent food for thought.