This has become so culturally important it’s a theme in our TV ads, magazine stories – and for some of us, in our dreams.  But when it comes to talking actual numbers, that’s when we tend to get scared and avoid doing the calculations. 

None of us can foretell the future, but we can agree on some basic, sound financial principles and guidelines.  It’s not enough to simply say “I’m saving,” you need a plan that includes specific targets and goals. It starts with a snapshot of where you are now, which can help you map out how much to save for a secure retirement.

Key Steps to Take

Action Step #1: Pick a retirement age. For some of us (wishful thinkers or not), it may be early.  Others may dread the thought of trading their richly rewarding professional field for the golf course.  Whatever the case, you’ll want to consider a realistic time period in which to focus on building your retirement nest egg.   

Action Step #2:  Figure out your income needs in retirement. Many planners use 70 percent of your income while working as a rule of thumb, but yours may vary significantly.

To get a good sense of what you’ll need in retirement, try a “practice retirement” for a few months. Add up the income you expect in retirement, include social security payments, pensions (if you’re so lucky), payments from annuities and one-third of a percent of your projected nest egg, per month. So if you expect to have $250,000 in retirement, figure you can spend about $800 a month from that. Now see if you can live off that amount. (Remember to make adjustments for big items. So if won’t have a mortgage by the time you retire, you reduce your housing expense.)

Can your streams of income in retirement fund your needs? If so, you’re set. If not, continue on to Step #3.

Action Step #3: Calculate how much bigger your nest egg will need to be to cover your expenses. This is the variable you have control over because you can increase it through saving more. Find your retirement fund balance today and look at how much you’re currently saving annually. These should be easy numbers to look up – even if they’re not easy numbers to swallow.  If you’re not saving enough, now’s the time to adjust you savings rate by increasing your monthly contributions. Or if you’ve maxed out your potential through work, does it make sense to consider a separate, Roth-type IRA?  

Action Step #4: Examine how your savings are currently invested. If you’ve got years to keep saving and time on your side, you can afford to be more aggressive in your investments, placing your bets on a higher return.  As your situation changes — you get a new job or raise — aim to increase the amount you are saving.  If you’re not comfortable making lots of specific investment decisions, many retirement plans now offer target-date funds, which are geared to your age and which become more conservative (less volatile) as you approach retirement.

Last-minute tips:  If number crunching is not your forte, there are any number of websites (including AARP, Fidelity, Pacific Life, AG Edwards) which feature easy-to-use online calculators that help you do the math … so you’ll have no excuses, if you really want to be a 401k Millionaire.

The Takeaway:  There’s no one-size-fits-all when it comes to retirement.  Be honest about your efforts to date, and look for ways you can increase your savings rate.