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By Christine Benz | 03-29-2010 04:34 AM

The Perils of Oversaving

You shouldn't party today and starve tomorrow, says economics professor and author Larry Kotlikoff. But you don't want to do the opposite, either.

Christine Benz: Hi. I am Christine Benz from Morningstar.com. I'm here today with Larry Kotlikoff. Larry is the author of a new book called "Jimmy Stewart is Dead," and he is also the author of another book called "Spend 'til the End," which talks about spending and saving in and before retirement. Larry thanks for joining us.

Larry Kotlikoff: My pleasure.

Benz: Let's start with "Spend 'til the End" and talk about the concept there because it's a contrarian idea. You acknowledge that many people are very under-prepared for retirement but also say some people are over-saving for retirement.

Kotlikoff: Yeah and the title of this book that I wrote with Scott Burns who is a syndicated columnist... it has a double meaning here. You want to spend, but you want to spend until the end.

Benz: You don't want it to run out.

Kotlikoff: Yes. You have to plan to spend up to your maximum age of life, which could be 100. So we have in our country a lot of people that are undersaving I would say probably 40% of the population in is undersaving, but we also probably have 20% that are oversaving, because it is a very difficult calculation how much should you spend. Traditional financial planning asks you to set some target. They say that's your number. Set your number.

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