Editor’s note: Roland Jones is an investment advisor for Capital Investment Companies.I used to think that was a cute song by the Beatles. It seemed like a sweet question to ask a girlfriend when we were in our 20s. Now, it is a question those of us in the Baby-Boomer years need to ask our children.

It seems that everything I read these days points to the lack of savings by Americans. At the kick -off of the “Save For Your Future” campaign in May, James Lock-hart, Deputy Commissioner of the Social Security Administration, said, “unfortunately, many Americans mistakenly believe that Social Security alone will guarantee their financial future. The reality is Social Security was never intended to be the sole source of income in our retirement years. Social Security was and is meant to be part of a three-legged stool, along with pensions and personal savings. Only half of today’s retirees have a private pension. And too few Americans save as much as they should.”

The 2003 Retirement Confidence Survey found that 29 percent of American workers say they or their spouse have not saved for retirement. The survey further noted that 61 percent of workers and 53 percent of all worker households have not calculated how much they will need to save for retirement. Of those who have calculated what they will need, 40 percent realize that they are not saving enough to meet their goal. Another study noted that people do not understand that a 65 year-old today will probably live an-other 20 years.

I can understand the failure to calculate the amount needed. But it can be a fairly simple calculation. Let’s assume you estimate your need at $50,000 per year for retirement. You are counting on roughly $15,000 from Social Security. You also have $50,000 in your 401(k). At a 5 percent annual return, that will give you an additional $2,500 per year. That leaves a shortfall of $32,500. Once again assuming a 5 percent re-turn… we hope it will be at least 8 percent, but we need to consider inflation…you need to save an-other $650,000 ($32,500/.05) by retirement!

Banking on the lottery?

Now you need to look at your options. Should you save more? Can you save more? Do you adjust your retirement expectations? Do you become more friendly with your children? Do you buy more lottery tickets? Do you ask your parents how much life insurance they have? Do you tell the boss you need a raise and a maximum contribution to the company retirement plan?

That last option is an interesting one. Barron’s had an article in a recent edition detailing the plight of defined benefit plans. There are 30,660 defined benefit plans covering 44 million workers and retirees. Those plans are “protected” by the Pension Benefit Guaranty Corp. (PBGC). The PBGC had a surplus of $9.7 billion in 2000.

With the failure of several large corporations including TWA, LTV, Bethlehem Steel, Singer and Polaroid, the surplus has now become a deficit of $5.4 billion. Worse, the Treasury Department says that defined benefit plans are under funded by a total of $300 billion.

For the rest of the business world, the plan of choice is the 401(k) plan. The popularity of the 401(k) plan is that is puts the onus for retirement savings on the employee. It also relieves the business of the need to make a contribution. In other words, the participants are responsible for their own retirement savings. To put this in perspective, consider the $1,270,000 savings needed in our example. If a participant in a 401(k) contributed $15,000 per year with a 5 percent annual return on investment, it would only take 34 years of contributions to meet the goal! If you think 5 percent is too low, at 10 percent it would only take 24 years of contribution.

Now, if that’s not discouraging enough, a survey of 1,000 Americans by the Million Dollar Round financial professional association, found that 35 percent of the respondents do not contribute to a 401(k) or IRA. So you say, “Why can’t businesses contribute to the plans?” Well they can, if they have enough money to do so. The business marketplace is extremely competitive. If your profit margins are too high, a competitor will take your business. Employees demand (comparatively) high wages. That is why you see so many jobs overseas. It is also why so many large corporations outsource work — though they may pay a premium (above salary), the savings in benefit costs more than make up the difference.

Help online

That brings us back to the individual being responsible for their retirement savings. There are web sites where you can get a better idea on your retirement needs. A good place to start is the Social Security Administrations site at www.ssa,gov . Next, you can go to a mutual fund site as most have retirement planners. A good one is provided by the American Funds Group. The web site is www.americanfunds.com . Once in the site, go to Financial Planning and then Retirement & IRAs. There you will see a link for the Retirement Planning Calculator.

Roland Jones is an investment advisor for Capital Investment Companies, one of the largest independent investment firms in the North Carolina managing over $1.2 billion in assets. Mr. Jones specializes in mutual funds, asset allocation and retirement plans. He can be reached at rjones@capital-invest.com.