Goal Setting

• It's important for people to identify retirement goals when deciding how much they'll need. The type of lifestyle they'd like during retirement will have a great affect on the amount that needs to be saved. Living in a gated community and traveling the globe costs far more than gardening and living in a small cabin in the woods. By making a line-item budget of projected expenses and adjusting for inflation, savers can determine approximately how much money they may need to operate their home during retirement years.
  
  

Considerations

• Although income in retirement may include Social Security, a pension or part-time income, all of these should be challenged while planning retirement income streams and contingency plans put into place. The Financial Planning Association estimates that Social Security may be extinct by 2037 if no changes are made. Historically, people planning retirement should consider that pensions have quickly disappeared and a retiree's ability to bring home a part-time pay check depends on his health.
  
  

Risk

• Retirement planners need to decide what rate of return benchmark they'll use to determine how much will be needed during retirement. Money markets and bonds offer low risks but historically low returns, while stocks and real estate have produced large returns historically but can fluctuate wildly in price.
  
  

The Future

• Although historically people have lived only a short while during retirement, the Financial Planning Association warns planners that retirement longevity is now becoming a concern, and people need to plan for increased longevity, especially those accepting early retirement offers. Much of the savings-puzzle calculation requires individuals to make other assumptions about the future, such as what future tax rates will be, what will the cost of health care look like, the aforementioned changes to Social Security, how will tax shelters change, and what investment returns can be considered feasible in the future.
  
  

Tools

• Free tools abound to help individuals determine how much they'll need to save for retirement. On the web, sites such as Yahoo! Finance, MSN Money and CNN Money have simple, cookie-cutter calculators to help determine how much to save. Lately, more comprehensive sites, such as Voyant, Simplifi and ESPlannerBasic have popped up, giving those wanting a more detailed picture more detailed tools.