Plan Your Retirement in 60 Seconds

Retirement. It's the Shangri-la we all have to look forward to at the end of our working lives.

With more than one-fifth of U.S. retirees depending on Social Security for virtually all of their income, for many, it's a poorly funded Shangri-la.

While there's no optimum amount to save for retirement, saving a little more over the course of your working life can mean the difference between retiring on dinners of lobsters or ramen noodles.

Say you're 35 and earn $60,000 a year. You intend to work for the next 30 years. How much difference would it make if you saved an extra 5% of your pay if your return is 8% a year?

The rather complicated calculation can be done in seconds using BankingMyWay.com's Retirement Planner Calculator.

To use the calculator you need to make one rather morbid assumption: after you choose your retirement age, you must guess at the length of your retirement.

At the end of this period the calculator assumes you "end your retirement." It's hard to imagine anything but the obvious scenario that you die, but perhaps it's leaving open the possibility that after decades of retirement you decide to become a Wal-Mart(WMT) greeter or that you find a fountain of youth.

Assume you "end your retirement" at 100, inflation averages 3.1% annually and your salary increases at 4% annually.

Saving an extra 5% a year results in additional nest egg padding of $465,000.

That's about an extra $1,200 of income per month in today's dollars.

But how much would you need to save to have a retirement income of 75% your preretirement income?

17%.

It may seem like a lot -- and 75% of your preretirement income may seem low, but at retirement, you'll be dropping at least one major expense, retirement savings. The 17% already assumes you're collecting social security income, but you may be able to lower the 17% by building up other assets, like home equity.

To explore other scenarios check out BankingMyWay's Retirement Planner Calculator.

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