How much money will you need to retire?
Many people never get around to figuring out the cost.
Some have a false sense of security, assuming that a company pension and Social Security will be enough.
Others are afraid to look at the numbers. They know they're not saving enough, but aren't willing to reduce their spending.
By the time you realize you're in trouble, say at age 50 or 55, it's often too late.
You've got to start planning now if you want some control over when you retire and your quality of life.
That requires tough decisions about spending priorities -- what has to be cut today to save for tomorrow, said Martin J. Satinsky, a Philadelphia retirement planner, lawyer and accountant.
Mr. Satinsky recommends these steps:
* How much income will you need? Plan on replacing about 70 percent of current spending if you don't cut back your lifestyle. The portion could be somewhat less if your mortgage is paid off.
* What income sources are available? Figure out how much you and your spouse will get from Social Security and pensions.
"Don't count the value of your home as a source of cash during retirement," Mr. Satinsky said. Real estate values may not hold up, and you may not want to move to a smaller place.
* How long will retirement last? You won't save enough if you only plan for 10 or 15 years. For people retiring at age 65, retirement could easily last 25 years, or until age 90.
* How much extra savings will you need? Don't just subtract Social Security and pension income from the annual need and multiply by the years in retirement. That greatly underestimates the cost.
Everything has to be adjusted for inflation, which increases your income needs many times over and reduces pension values.
* Figure out how much you need to save annually to fill the gap between current savings and future needs.
Suppose you're starting from scratch. You would need to save $10,400 a year to reach a goal of $473,000 in 20 years, assuming an 8 percent return.
Can't save enough to reach your goal? Roger C. Hindman, a retirement expert at Price Waterhouse, said you've got several options:
Cut back spending in retirement. The lifestyle you want may not be realistic.
Increase returns on savings by taking more investment risks. If you won't need the money for 20 years, two-thirds of your savings should be in stocks, which provide more growth than bonds or CDs.
Plan on working past age 65, even part time or as a consultant. Earning $10,000 or $15,000 a year can have a big impact.