How do you know how much money you need for monthly retirement expenses? There are numerous formulas you can use. If you have access to the Web, there also are a handful of helpful calculators. (Some of the best are at http://www.familymoney.com.)

But no matter how you figure it--by hand or by Web--you must start by trying to determine how much you'll spend in retirement. A good way to do that is to figure out what you spend now, then adjust your budget to reflect the changes you anticipate at retirement. For instance, if you expect your mortgage to be paid off, subtract that cost from the amount you'll need each month. If you expect to travel or golf more, add costs for vacations and greens fees. After you have a projected monthly budget, you can use a multiplier to adjust that figure for inflation.

The tricky question is: For how many years will you need that monthly income? Unless you know for certain when you'll die, you'd be wise to estimate on the safe side by figuring you'll live on interest and leave your principal alone. This conservative assumption also allows you to use a simple calculation to determine how much of a nest egg you'll need to generate your required monthly income. Then it's a matter of using a few multipliers to see what your current nest egg and monthly savings will be worth when you need it. In your final step, you simply compare what you've got--and will have from planned saving--to what you've established you'll need. The work sheet and charts below should provide some help in doing the math.

Step 1: Determine what you'll need.

Take your current monthly budget; add in money for expenses you believe you'll have in retirement that you don't have now--additional vacations and higher medical costs, for example; subtract expenses you expect will evaporate before or upon retirement, for things such as a mortgage, work clothes and commuting. Enter the result:

Line 1: $

Step 2: Adjust for inflation.

Multiply the result on line 1 by the appropriate multiplier in the chart at left.

Line 2: $

Expected inflation rate: (The historical average is about 3%, but if you want to be more conservative, use the 4% multiplier.)

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Years to goal 3% 4% 5 1.16 1.22 10 1.34 1.48 15 1.56 1.80 20 1.81 2.19 25 2.09 2.87 30 2.43 3.24 35 2.81 3.95 40 3.26 4.80

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Step 3: Assess your nest egg.

How large must your nest egg be to generate the monthly income on line 2? To determine that, divide the interest rate you expect to earn on your money in retirement by 12 to get a monthly rate of return. (You should anticipate that your returns in retirement will be more conservative. In today's market, a 5% or 6% average annual rate of return would be reasonable. If you wanted to use 5%, you would divide 0.05 by 12 to get 0.004167.) Enter the result:

Line 3: $

Step 4: Determine the savings you'll need.

Divide the result on line 2 by the result on line 3. This is the total amount you must have saved to achieve your desired monthly income without dipping into principal. (If you have determined you need $6,000 per month, after adjusting for inflation, and you are likely to earn 5% on your nest egg while retired, you would divide 6,000 by 0.004167 to get a required nest egg of $1,439,885.)

Required savings: $

Note: When planning monthly retirement needs, be sure to factor in any anticipated benefits from Social Security or a pension.

Step 5: Calculate savings value at retirement.

Determine what your current savings will be worth at retirement by multiplying the total balance in your retirement account by the appropriate multiplier below. (For example, if you have $100,000 saved and figure you'll earn an average of 8% annually on your money for the next 25 years, you'd multiply $100,000 by 7.34 to get $734,000.)

Value of current savings at retirement: $

Expected annual rate of return

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Years to goal 5% 6% 7% 8% 9% 10% 5 1.28 1.35 1.42 1.49 1.57 1.64 10 1.65 1.82 2.01 2.22 2.45 2.70 15 2.11 2.45 2.85 3.31 3.84 4.45 20 2.71 3.31 4.04 4.93 6.01 7.33 25 3.48 4.46 5.72 7.34 9.41 12.06 30 4.47 6.02 8.12 10.93 14.73 19.84 35 5.73 8.12 11.51 16.29 23.06 32.64 40 7.36 10.96 16.31 24.27 36.11 53.70

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Step 6: Figure in additional monthly savings.

Determine what your additional monthly savings will be worth at retirement by multiplying the amount of your monthly savings by the appropriate figure below. For instance, if you are saving $300 per month and you expect to earn 8% annually while you contribute over the next 25 years, you'd multiply $300 by 951.03 to get $285,309.

Value of monthly savings at retirement: $

Expected annual rate of return

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Years to goal 5% 6% 7% 8% 9% 10% 5 68.01 69.77 71.59 73.48 75.42 77.44 10 155.28 163.88 173.08 182.95 193.51 204.84 15 267.29 290.82 316.96 346.04 378.41 414.47 20 411.03 462.04 520.93 589.02 667.89 759.37 25 595.51 692.99 810.07 951.03 1,121.12 1,326.83 30 832.26 1,004.51 1,219.97 1,490.36 1,830.74 2,260.49 35 1,136.09 1,424.71 1,801.05 2,293.88 2,941.78 3,796.64 40 1,526.02 1,991.49 2,624.81 3,491.01 4,681.32 6,324.08

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Step 7: Plot your strategy.

Compare what you will have with what you will need. If you're likely to have more than you need, you can scale back, invest more conservatively or figure you'll live better or become more generous in the future. If you don't seem to be saving enough, you must either boost the amount you're saving regularly or invest more aggressively.