Recommended Saving for Retirement

Complex Formula

Retirement income needs will vary. When recommending how much you need to retire, financial advisers start with some basic factors, such as your current income, age now and age at which you plan to retire. They add to that your estimate of what percentage of your current income you'd need in those retirement years. This is a question about your lifestyle and how much you're willing to negotiate in your latter years. In addition, financial advisers figure in how much money you're already guaranteed from a pension and Social Security. These safety nets can theoretically reduce the amount you have to save now. Your expected life span is also a factor. If you retire at 65 and live to be 95, you've got 30 years to cover. Finally, estimates of inflation will tell you what money you save today will be worth tomorrow.

$1 million is the answer retirement specialists often hear when asking people how much money they want to save for retirement. It's a neat figure that represents a comfortable lifestyle to many Americans. But it may not be enough, say registered investment advisers in Scottrade Advisor Services survey in February 2010. The poll made projections on savings needs by generation. For Generation Y, ages 18 to 26, the consensus was these young people would need at least $2 million, but a strong minority of the financial professionals cautioned this generation should target $3 million. Generation X, ages 27 to 42, the range was between $2 million and $3 million. Among Baby Boomers, ages 43 to 64, most agreed they needed $1.5 million to $2 million. For seniors, the advice was to aim for between $500,000 and $1.5 million.

When it comes to retirement planning, sooner is always better than later thanks to the magic of compound interest. Squirrel away starting in your 20s, says finance guru Suze Orman. Open an IRA and take advantage of your employer's retirement plan, and tuck away some of your income every year. Live on a budget. In your 30s, she advises that you concentrate on ridding your debt and ensuring you have adequate life insurance. By your 40s, she says, "Put the pedal to the metal" in paying down your mortgage, so that when you retire, the debt is gone. And don't acquire new debt, such as co-signing on your children's car, house or education. Thereafter, you should be dotting Is and crossing Ts to ensure that your financial house is in order by the time you retire. In each stage of life, other retirement planners suggest reviewing your investments to ensure your savings strategy is on target, diversified and in accordance with your tolerance for risk.

With the recession of the late 2000s and weak economy in 2010 and 2011, more Americans were raiding their retirement accounts to stay afloat with record unemployment and rising foreclosures, according to MSN Money. Younger people in the throes of a bad economy have the luxury of time on their side. When it stabilizes, they have the time to replace that money. Older Americans might have a forced strategy to face: forget retiring "on time," work longer to save more money, and make substantial cuts in your lifestyle. CBS MoneyWatch calls this "Plan B," to which millions of Americans will likely resort in the coming years.