Larry Kotlikoff is a Professor of Economics at Boston University http://people.bu.edu/kotlikoff/
http://www.esplanner.com/

Here is the transcript of NBC10's interview with Professor Kotlikoff:

QUESTION: The government just told us we're in the worst savings scenario since the depression. Personal Savings is not negative for most Americans. Should we be worried?

KOTLIKOFF: Well, we have a lot of people who are undersaving, and a lot of people who are oversaving. The actual personal saving rate that the government is talking about really reflects, to a large extent, the fact that the elderly are doing lots of consumption because the government's giving them a lot of transfers in the form of medical goods and services through Medicare and Medicaid. So a lot of those aggregate numbers are not really indicative of what's going on among younger and middle-aged people. In that group, you have some people who are saving far too little, but you have a lot of other people saving far too much. The problem is, this is a highly complicated decision - how much you should save. And the tools that are out there are really like 14th century medicine in terms of trying to address the complexity of this issue.

QUESTION: What's wrong with the financial calculators/scenarious most people use to figure out how much they should save for retirement?

KOTLIKOFF: Well, those calculators are set up by companies that are trying to sell you insurance or mutual funds, you know, they're trying to make a sale so they're recommending things based on maybe five questions that they asked you, that are for most households, far too much in terms of what they're telling people to save. And then the next thing that happens is they tell people to invest in very risky securities in order to make the probability of meeting these targets that are too high, make that probability higher. So, what economist say, what economists say, is that we're trying to have a smooth, stable living standard. The goal is not to live it up like crazy when you're 82, the goal is to have a smooth ride throughout, and these calculators just aren't up to the job.

In some cases, these calculators are recommending five times too much savings. In some cases, they're recommending 4 times, 5 times too much life insurance. And when they give you a 5 question, questionnaire, and then they recommend saving and insure this amount, they're really not doing you any service, they're trying to rip you off here.

QUESTION: What should I consider when I'm figuring out how much to put away?

KOTLIKOFF: Here's where I have to take off my professor's hat and also become a salesperson. I have a software product called ESPlanner and we sell it on ESPlanner.com. It's based on economic principles of trying to smooth your living standard and get you to the highest sustainable living standard, through time. Economics is now at a point where we can go from describing problems that people have financially speaking, to actually prescribing cures. And this software, ESPlanner, is actually one of the first products that I think that are going to come onboard to help people figure out exactly what to do.

QUESTION: You have software you sell at www.ESPlanner.com. How do your factors for savings differ from the other financial calculators out there?

KOTLIKOFF: Well, it's not asking you anything that's complicated. It may ask you what your mortgage is, whether you have a plan to move your home, what ages and number of kids you have. These are things that are very basic and very important. The other calculators don't ask any of these kinds of questions or ask very few of these questions and they're just guessing at what you really need. So this software is not really asking you to set a target for yourself, it's finding the target, finding how much you can spend now and in the future, such that you have a smooth ride. That's the difference. It doesn't ask you to plan for yourself.

The goal according to economics, is to have the same living standard per person, through time. When there are kids at home, you have to spend more and our software certainly recommends more spending when the kids are at home, but we're trying to have the same living standard per person in the household as the household goes through time.

QUESTION: Should everyone who can, invest in a 401K?

KOTLIKOFF: Well, not everybody. It really depends. For some low-income households, if they put money into a 401K, they don't save a lot of taxes because right now they're not in a very high tax bracket. They have a child tax credit, they may be getting an earned income tax credit. Then, when they put the money in the 401K and take the money out at retirement, they may be in a much higher tax bracket than they are today and it may actually be a tax "trap" if you like, it could actually lead to a higher lifetime of taxes for low income people. For high income people it's a great boondoggle. It's a terrific way to basically beat Uncle Sam. So it very much depends on your age and your situation. There's also something called the Low Savers Credit that applies to low-income people, but you can only take advantage of it if you're paying taxes. So, if you're low income and you're older, maybe 60, it may be a terrific deal. You're in an age bracket where you don't have kids, you don't get the tax credit for children, and therefore you're paying positive taxes and you can take advante of the saver's credit and it can be a terrific thing to do, put money in the 401K, get the saver's credit and lower your taxes in two ways, and then potentially pay taxes at a lower rate when you take the money out. Just depends. And our software allows you to figure out whether it's a good thing to do or not, because in two seconds you can figure out what it means to your living standard, to contribute or not to.

QUESTION: How do you answer the critics, some who say the "save less, be OK later" theory is not only irresponsible, but insane?

KOTLIKOFF: Well, you've got to realize, I'm not saying that everybody is oversaving, I'm saying there's lots of people who are undersaving dramatically and others are oversaving. It's very complicated. The software that's out there really represents a form of financial malpractice. these companies are really trying to sell product. They're not giving good advice, reputable advice, and individuals should avoid them. So, I have a long history of concern, in terms of my research, about the national saving rate, and understanding. I've done lots of research of saving and insurance adequacy. So I think I know what I'm talking about.

QUESTION: How many of us are oversaving?

KOTLIKOFF: I think it's a mixed bag. I think you probably have 60 - 40. Sixty percent are undersaving, forty percent are oversaving.