Perspire to retire!

I was all fired up to save for the future. Then I found out I was a day late and about, um, $90,000 short.

Editor's note: This is the first in a new series of personal essays about life during a recession.

By Heather Havrilesky

Read more: College, Economy, Recession, Heather Havrilesky, Life, Pinched

Aug. 4, 2008 | Recent gloomy talk of recession has given way to even gloomier talk of stagflation, that dreaded combination of rising prices and slow growth. But until a few weeks ago, I'd remained calm about my financial prospects. "Let the Chicken Littles of the world worry!" I told myself. "I'll just cut up my credit cards -- once I pay them off -- and then I'll sock away plenty of money for the Even Greater Depression. We'll be a family of scrappy but satisfied bean eaters! Our neighbors, with their updated kitchens and their enormous home equity lines and their brand-new cars, may gawk at us now, planting tomatoes and splashing our feet in the baby pool instead of going to the movies or shopping at the mall. But soon, they'll be packing their stainless-steel appliances into their covered wagons and heading east to look for work, while I smugly stand here, doing dishes in the 100-degree heat of my un-air-conditioned Los Angeles home and feeling proud that all of our penny-pinching finally paid off!"

I was so excited about my savings plan that I made an elaborate Excel chart to track how much we could save each year in retirement funds and college savings funds and emergency money funds until, thanks to the magic of compounding interest, each fund would swell to an impressive size. I showed these big numbers to my husband to demonstrate how going without new clothes and a new surfboard for another year (or 10) was eventually going to pay off. Naturally, I didn't tell him that we couldn't actually save that much for retirement and college and emergency funds all at once. But it was so much more invigorating to see all of the numbers getting bigger and bigger that I couldn't resist.

After all, I had memorized the main strategies recommended by every financial planner in the book: Max out your retirement savings, put away money for college well ahead of time, try to pay your mortgage off sooner, set aside enough cash to cover six months of expenses and cut up your credit cards. If I didn't envision a world where we could do all of the above, then there was a "hole" in my financial plan. All of the experts warned against holes. Holes rendered comfortable people destitute. Better to suspend my disbelief, disregard the laws of space and time, and aim for the stars!

So we stopped eating out. We stopped seeing movies. We stopped buying meat that wasn't on sale. We stopped considering even small purchases. Those (slightly unrealistic) Excel charts assured us that we were scrimping now to ensure a glorious financial future later, one free of worry and stress in which we'd relax in a nice, old house with big windows (and central air). Our kids could attend the colleges of their choice, and we'd take yearly trips abroad, mostly to sit around in pretty places eating delicious, exotic foods.

Then one day I decided to try out an online retirement calculator, just to reassure myself that we were well on our way to not just a secure financial future but also a rosy one. I plugged in my age (38), my current retirement savings (respectable), my desired income upon retiring (50K) and a few other figures, and pressed "calculate" with a little smile on my face, ready to be praised for my prudent savings and congratulated on the happy, golden years ahead.

Instead, I read these words:

"To retire with an inflation-adjusted retirement income of $50,000 for 20 years would require $3,075,744.65 in savings by the time you retired at 65. You need to save an additional $47,613.58 each year to reach your retirement goal."

Sweet Jesus. Three million dollars? Forty-seven thousand dollars a year? How is that even possible?

Hold on. Maybe my husband's figures would be a little more promising than mine. He had less saved, sure, but he'd also be retiring sooner, since he was seven years older than I, and obviously this calculator was a little too sensitive to inflation. I plugged in his age and savings.

"You need to save an additional $64,943.35 each year to reach your retirement goal."

Deep breath. OK, but what if we combine our retirement savings? Even though my copy of "Smart Women Finish Rich" cautioned me against depending on my husband to secure my financial future, desperate times call for desperate measures. What if we aimed for a combined income of 80K a year, and aimed to retire 25 years from now? As tough as it was to picture my already absent-minded husband working at age 70, that would give us more time to save.

"You need to save an additional $93,397.05 each year to reach your retirement goal."

Unbelievable. Why doesn't it just say, "You're screwed. Prepare to toil away for the balance of your days on earth"?

Suddenly, an activity that was supposed to make me feel secure and satisfied instead became an exercise in extreme torture.

Which is probably why I spent the rest of the day doing it. I found calculators that took Social Security into account (without asking you to input the odds that Social Security will still exist in 20 years). I found calculators that included how much I will (theoretically) set aside each year, and calculators that predicted my chance of reaching my retirement goals, based on the historical returns of my particular investment style (fearful but aggressive, just like the most dangerous sorts of dogs). As each sad forecast flashed back at me, instead of growing more depressed, I grew more masochistically driven to crunch a slightly different set of numbers. I used doomsday-pathetic rates of interest, while raising inflation rates to harrowing peaks. I wrote off the predictions of some of the more forgiving calculators as hopelessly optimistic. Eventually, I began to derive a perverse pleasure from generating the most ridiculous numbers possible. I entered a world of fantasy, predicting how much I'd need to be able to stop working in 20 years, 10 years, five years. Finally, I pretended I had a million dollars right now, just to see the words I was looking for:

"Congratulations! You already have $23,741 more than you need in savings."

Ah, that felt good. Until I thought about it for a minute: Someone who has saved a million dollars by age 38 should be congratulated for being able to live off $50,000 a year in 20 years, with enough left over to buy a car?

Toying with retirement calculators was so exquisitely painful (and such a profound waste of time) that by the next day, I had upped the stakes with college savings calculators. How much should we be saving each year to send my 12-year-old stepson and 2-year-old daughter to public, in-state universities? One thousand dollars a month, of course. (Private schools would mean saving 2K a month.) Now let's see, let's throw that 12K-a-year minimum in with the 93K a year we're supposed to be saving for retirement, and what do we have? One hundred five thousand dollars a year in savings. Now tell me, who has an extra 100 G's lying around each year, aside from some of your more enterprising rappers? Even if my husband and I don't have an additional kid, even if we somehow manage to start saving one-third of that amount in 10 years, barring some personal financial disaster -- which the experts tell you that you should never, ever rule out -- where does that leave us? Goodbye, nice old house. Goodbye paid-for college educations. Goodbye exotic, delicious foods.

Next page: Some might say I've made bad, spoiled, selfish choices