Independent Thinking^®

“The Number”

About 10 years ago, the former Esquire editor Lee Eisenberg wrote a book titled The Number that his publishers were convinced would fly off the shelves. It did okay, but nothing like the marketing department had hoped. Apart from young traders on Wall Street, who have a more colorful term for their number, it appears that Americans don’t want to think too much about the real cost of financial independence. That’s in part because the number itself keeps changing.
 
I was first exposed to real wealth in 1970 when I was asked to help a senior trust officer settle an estate built in the previous century. I had read my Fitzgerald, of course, but it was still difficult to wrap my head around the scale, especially when I calculated that the income from the municipal bond portfolio alone produced more income on a daily basis than I was likely to make in the entire year, and the beachfront mansion alone would take several lifetimes. At the time, I was focused on moving out of my parents’ home and paying off my student loans.
 
My number took shape then and grew steadily since, although never to anything like the heights of that particular fortune. Most young people – including those traders on Wall Street – soon discover that “my number” becomes “our number” as they are joined by spouses, children and, ultimately, life’s great dividend, grandchildren. Aging parents and philanthropic interests also play a part, and the number that seemed so great at age 25 may seem laughably small at 55, when most people still have not given much thought to long-term healthcare.
 
Even on its own, the number keeps growing – the $1.5 million to $2 million that Eisenberg calculated was enough to live on comfortably in New York City seems rather outdated now. (I should note that this was the smallest of his four brackets; he also observes that one New Yorker’s idea of a secure retirement fund is another’s long weekend.)
 
Older Baby Boomers like me are no longer living our lives in anticipation of that ever-growing number but are instead shaping our lives to fit the one we’ve actually managed to achieve. Many people are aware that they have to scale back; others realize that they could be doing more with their wealth but are uncomfortable with what they perceive as the associated risks.
 
For my partners and me, this is where our work gets interesting: We engage directly with our clients to help them articulate their goals and understand their number in that context – that’s really why we founded our firm. It is our job to help protect and foster those goals, by converting each client’s number into an appropriate asset allocation with realistic investment return assumptions that reflect income taxes and inflation, focusing on the potential for drawdown.
 
In the 45 years since I toured that Florida estate and thought for the first time about my client’s and my own numbers, I have seen many great and modest fortunes built, preserved and successfully transferred to succeeding generations – mostly through hard work that became a reward in itself (something else those young traders will come to learn). Protecting the resulting number and the goals it represents is our privilege.
 
Jeff Maurer is the CEO of Evercore Wealth Management. He can be contacted at [email protected].