This week, in the Wall Street Journal there is an excellent article on whether the United States should retain or eliminate the estate tax.

Just as a quick reminder, there is no estate tax for estates of someone who dies in 2010. Under current law, 2011 brings a $1 million exemption and then all assets > $1 million are taxed at 55%. Of course, there is intense speculation regarding what Congress will do between now and 1/1/11, and perhaps in 2011 retroactively. The important question, however, is “should I care?”

The estate tax, even if the tax law isn’t changed by January 1, affects only those estates over $1 million. According to the Urban-Brookings Tax Policy Center, the estate tax only concerns the top 1% of Americans. So, what about the other 99%?

There is an old adage – “live long enough to be a problem to your kids.” Perhaps the estate tax should be retained and taxes imposed at $1 million, but only as a goal for the 99% of Americans who historically haven’t attained that figure. Maybe we should coin a new adage – “save enough to have an estate tax problem.”

So, how to get to $1 million if you’re starting from $0? Well, it helps to start early, and to save a LOT. Let’s look at a bit of math – maybe you’re 45 years old and will live to be 85 (according to the U.S. Social Security Administration Actuarial Table, the average male in the United States who is 45 today will live to age 78, while the average female will live to age 82). Let’s also say that you would like to retire at age 65 and spend about 70% of your current income. If you believe that over the next 40 years your average after-tax return on investments is 8%, then the calculations would work like this:

• Age 45 to 65 – save $20,000 per year and invest with an 8% after-tax return = $915,239
• Age 65 to 85 – spend as much as you can while keeping the amount per year constant and leaving your estate at $0 at age 85 – same 8% after-tax return = $81,219 per year.

Note that even after saving for 20 years at $20,000 per year with an 8% annual return, your savings would still be less than $1 million.

It’s at this point where many of us just give up – we say to ourselves “I’ll never save enough to retire, so why bother? I’ll just keep working until I die or will depend on my kids or the government will take care of me.” I don’t know about you but depending on my kids, as well educated as I hope they will someday be (fingers crossed here), scares me. Depending on the government really scares me. So, is there a way just to get started, a single step on our journey of 1,000 miles?

Here’s the first step – everyone, and I mean everyone, no matter how secure your job, no matter how much you think your beer can collection is worth, needs to have 6 months of after-tax income in the bank, in cash or a money market, at all times.

Is it difficult to go from $1,000 or $5,000 or some other amount you may have in savings today to where you need to be? You bet it is! The money just doesn’t appear overnight and there are so many temptations along the way.

The question is – what can you do today to get started?