If you're planning to retire soon or years from now, you may be in for some unpleasant surprises if you're not aware of what retirement planners call "The Magic Numbers." The numbers indicate how much money you'll need to cover expenses, how much your pension and or Social Security will pay you, how much your IRA or 401(k), or other company retirement savings plan will provide, what your investment retirement portfolio should have, and a few other important numbers, such as the earliest age at which you can retire to collect Social Security benefits. (Find out how to determine whether you're on the path to a comfortable retirement or financial ruin. See Will Your Retirement Income Be Enough?)

TUTORIAL: Registered Retirement Savings Plans

If these numbers don't add up to a timely and comfortable retirement, you may have to keep working to keep up the standard of living you'd like. Too many people think they can live in retirement less expensively than what it cost them when working full time. Unfortunately, they're often wrong. Here are the numbers and how they may figure in your retirement plans.

70% of Your Full-Time Work Income
You'll need at least this percentage of what you earned while working as retirement income to live comfortably, according to the experts. Assuming you earn from $60,000 to $100,000 annually after tax, you'll need from $42,000 to $70,000 every year during your retirement. Since from 25-30% of pre-retirement income usually goes to pay for lodging - mortgage or rent - count on spending this much of your retirement income if you haven't paid off your mortgage or pay rent for your residence.

Itemize and add up all your expenses today, while you're still working. Then analyze them one by one to determine which costs will increase, which will decline, and which will be eliminated. The costs of health insurance may increase if your employer previously picked up this expense. Even if you qualify for Medicare coverage, you may want to buy supplemental insurance, which gets costlier as you grow older.

The cost of lodging may decrease if you sell your house or condo and buy a smaller residence, pay off or refinance your mortgage, or move into smaller rental quarters.

Costs of commuting to and from work, clothing, and other incidental expenses required for your job may be reduced or disappear. The calculator accessed through this link can help you estimate various retirement costs. (We'll show you how to choose between Roth IRAs, Traditional IRAs and 401(k)s. Check out Which Retirement Plan Is Best?)

$2,366 Per Month
This is the maximum amount of Social Security income for someone who retires at age 66 in 2011, who has earned the maximum taxable amount annually every year after age 21. Most retirees will collect less. To calculate your estimated Social Security income, check the Social Security Administration site.

This is the minimum age, currently, at which you may retire to get Social Security income. As a general rule, however, the longer you delay retirement, the more Social Security income you'll collect up to age 70. Social Security benefits may change and payout amounts reduced in coming years as the government attempts to solve the national debt crisis.

As mandated by law, this is the required minimum distribution (RMD) you must withdraw this year from your 401(k) or IRA at age 70.5, and assuming a principal of $100,000. Married retirees with a spouse ten years younger will have a smaller RMD.

Retirees of different ages, with differing amounts in their retirement plans will have differing RMDs. Check IRS Publication 590 for information on how to calculate your RDM.

$1 Million
This is the minimum amount previously cited by retirement planners needed in an investment portfolio to provide retirees with a comfortable retirement, in addition to, or as a replacement for pensions, Social Security income, IRAs, 401(k)s and other retirement plans. These days, however, with interest rates almost at zero, and inflation looming as a result of the huge national debt, $1,000,000 may not be adequate.

This has been the average annual growth rate of the economy over the past few decades. Use this percentage, with the annual amount of your investment, to calculate your compound annual growth rate (CAGR) over the years of your working life to project the amount of your nest egg at retirement. The rate of return will vary over the years, both increasing and declining, impacting your CAGR and requiring recalculation to determine how much to invest annually to reach that magic $1 million - or beyond.

When the economy grows at a more vigorous rate than the paltry current 2%, all the better for compounding your rate of return and the bigger your retirement bottom line. But as of the end of June 2011, many financial analysts gazing into the future don't forecast much of an increase in the short term. Nevertheless, keep saving, because you're going to need more money than you originally thought. (The CAGR is a good and valuable tool to evaluate investment options, but it does not tell the whole story. Refer to Compound Annual Growth Rate: What You Should Know.)

The Bottom Line
Like everything else in life, the magic numbers may also change. A prudent approach to retirement is to keep up with the latest information from news and government sources, from your employer regarding your retirement plan, and from your financial adviser, if you have one. The inevitable changes in the numbers could have a major impact on your retirement planning and how much money you'll have after your last day at work.

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