STEP ONE: DETERMINE YOUR RETIREMENT GOALS

To know how much money you will need for retirement, you first have to determine the retirement lifestyle you want. You'll want to answer these questions:

How early do you want to retire? The earlier you want to leave the workplace, the less time you have to get your financial act together and the more time in retirement you need to fund.  What percentage of your current living expenses will you require? You may not need the large home, several cars, or funds to pay for raising children and holding a job. But if you plan to travel or live the country club lifestyle, certain expenses may increase.  What other plans will you have? Do you want to buy a sailboat, retirement home, or the camper of your dreams? Does your health suggest you may need more medical care?  What will inflation do to your income? You need to consider how inflation will change your income needs. In 20 years, a 4 percent inflation rate will more than double the amount of money you will need to keep your current standard of living.

Once you have determined what your needs will be, the next step will be to look at the retirement resources you have.