Start planning now, following these key steps:

1. Determine how much income you'll need after retirement. How do you plan to spend your retirement years? Will you travel a lot or are you content to stay home pursuing inexpensive hobbies? Will you stay in your current home or move to another climate? Will you retire totally or work part time? Take time to detail your expected expenditures during retirement.

Depending on your plans, you may need anywhere from 70 percent to more than 100 percent of your current income in retirement. If you're so far from retirement that you're not sure what you will do, use a range of retirement income assumptions, such as 70 percent at the low end, 90 percent in the middle range, and 110 percent at the high end.


2. Decide when you want to retire. Although you may want to retire at an early age, the financial realities of supporting yourself for those additional years may make that difficult to achieve. You may need to postpone retirement to save the amounts needed or consider part-time employment after retiring.


3. Estimate your current retirement benefits. Assess how much you're likely to receive from Social Security and company pension plans. Over the years, these benefits have been providing a smaller percentage of retirement income, so be sure to use conservative estimates.


4. Add up your current retirement savings. Prepare a net worth statement to help you determine how much you currently have saved for retirement, both in tax-advantaged and taxable investments. Also consider other financial needs that must be met, such as paying for a child's college education or paying for nursing home care for an elderly parent. These needs can significantly impact how much you'll have available for retirement.


5. Develop a retirement savings plan. Based on the above factors and considering inflation, you should be able to estimate your total capital needs at retirement. You can then calculate how much you need to save on a monthly, quarterly, or annual basis.

Don't give up at this point if you can't afford to save the amount required to meet your goals. You can start out saving what you can, increasing your savings in subsequent years. Or you can revise your retirement plans. Reducing your financial needs, delaying your retirement age, or working part time after retirement can substantially impact the amount you'll need for retirement.


6. Review your retirement plan annually. This allows you to assess your progress and make any needed changes.