Roughly 75% of Americans over the age of 40 are failing to keep up with saving for retirement, and close to one-third report that they have no retirement savings at all. With the future of Social Security somewhat unclear, preparing for retirement today is essentia to funding your future. Oddly enough, in my experience, I find that many individuals approaching retirement have not considered how they will generate income once their paycheck goes away. Sure, you may receive $20,000-$40,000 in Social Security benefits, but that simply may not be enough to cover the rising cost of healthcare, general inflation on goods and services, and any emergencies that may come up in a 20- to 30-year retirement period. That doesn’t even include any of the fun stuff, and isn’t that the point of retirement, at least to some degree? You’ve worked hard for the past 40 years or so, and now it’s time to enjoy the fruits of your labor. If you haven’t prepared for retirement properly, those fruits might not be what you’ve hoped for.

As you travel down your road to retirement there are important milestones to consider and routes you can take to help you reach your destination. One wrong turn can lead to a much longer journey. One of the biggest mistakes I see is procrastination. It got us in trouble when cramming for a college test, and it’s getting us in trouble now when preparing for a successful retirement. Putting a road map in place is essential in making informed decisions on how best to proceed. If your savings aren’t properly invested, every day that goes by, you are losing time and, more importantly, losing the benefits of compound interest. The first step on the road to retirement is finding your “retirement number.” Sounds cliché, doesn’t it? However, identifying this number will help you determine how close you are to achieving your desired retirement lifestyle. Your retirement number is the sum of liquid assets needed to produce a targeted cash flow stream in retirement.

As we go through these examples, keep in mind that the numbers we use can change based on your specific lifestyle, but the concepts and general math will remain the same. For example, let’s say you spend $100,000 in aggregate before taxes each year. If a $100,000 lifestyle is what you want to live in retirement, then you need to know how much that lifestyle will cost in future dollars, factoring in the impact of inflation on goods and services. So, if retirement is 20 years from now, and we use an assumed long-term U.S. inflation rate of 3.5%, at retirement, you will need roughly $198,000 to live a similar lifestyle. Maybe you want to travel more in retirement and spend $120,000 annually, or maybe you simplify life in retirement and project you will only need $80,000 per year. In either scenario, be sure to apply the inflation rate over the remaining years left to your retirement date.

Read more @Forbes