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Dreams of easy retired life
will shatter without a plan

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LIKE many people, you may have envisioned your "ideal" retirement lifestyle. Maybe you'd like to travel around the world. Or perhaps you'd like to spend a lot of time volunteering for a favorite charitable organization. Or you may even want to open up a small business. Your choices are pretty much limitless, but they all have one thing in common -- they probably won't happen unless you plan for them.

And, not surprisingly, the biggest thing you'll have to plan for in your retirement years is how much money you'll have available. But just about four in 10 workers have calculated how much they'll need to save for retirement, according to the Employee Benefit Research Institute's 2004 Retirement Confidence Survey.

If you don't know how much you'll need during retirement, you can't really know how much to save -- and how to save -- before retirement. So you've got to come up with some numbers, and then you'll need a strategy to achieve them.

How much will you need?

Once you've identified your retirement goals -- travel, volunteering, small business, etc. -- you can set a price tag on them. You'll find it extremely useful to work with a financial professional -- someone with the experience and technology necessary to project your retirement costs, taking into account annual expenses, number of years spent in retirement, inflation, taxes and a variety of other factors.

The end result of these calculations? A dollar amount that will be sufficient to allow you to enjoy the retirement lifestyle you've pictured.

Investment strategy

To achieve your hoped-for retirement, you asked: "How much?" Now here's your next inquiry: "How will I get it?"

If you're going to hit your retirement savings target, you'll need to know where the money is going to come from. Most people draw retirement income from three main sources: Social Security, personal savings and investments, and a pension, 401(k) or other employer-sponsored retirement plan.

You should have a pretty good idea of how much you can expect from Social Security, because each year you get your projected benefits statement. And if you have a traditional pension from your employer, you also should know, with a fair amount of certainty, about how much money you can expect to receive.

However, when it comes to your personal investments and your 401(k) or similar employer-sponsored plan, you'll need to ask yourself some things: How much do I need to put away each year? What sort of return do I have to earn? How much risk am I comfortable with? How can I control taxes on my investment earnings?

Clearly, you'll have to put some effort into answering these types of questions. And, again, you'll greatly benefit from the services of a financial professional who knows your situation, your risk tolerance and your investment preferences.

But, whether you use a financial professional or not, you'll have to depend on yourself for the discipline to follow the investment strategy needed to meet your goals.

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