Saving for retirement: part one

Many of us look forward to the day when we can retire. Everyone has a different idea about what retirement will mean. Maybe you want to travel, see the world. Or perhaps you want to just enjoy spending time at home, with your family. The retirement lifestyle you choose determines how much you need to save. We know that each person's goal is unique as they look ahead to the golden years. But certain rules apply to everyone.

John Pelham is a certified financial planner. When it comes to saving for retirement, he advises clients to plan for at least 30 years past retirement age. "The rule of thumb is that you're going to need 60 to 80 percent of your pre retirement income,"{}says Pelham. "With a married couple, there's a 60 percent chance that one of them is going to live to be over the age of 85. There's a 90 percent chance that one of them will make it to age 90. So the risk of outliving your money is very real." If someone is looking to retire and live a simple lifestyle, Pelham believes one million dollars is the number to reach. He breaks it down this way.{} On average, people will spend four percent of the saved amount annually. If someone saves a million dollars for retirement: "That four percent sustainable rate means about $40,000 a year. That doesn't take into account other income sources you may have, like social security, other pensions you may have. But if you're talking about somebody with a million dollars and no other sources of income, four percent is a relatively safe assumption." Even with inflation, Pelham believes the million dollar mark provides a solid foundation for the golden years.{} "There's an 80 percent probability that you would never run out of money,"{}says Pelham.William Hocutt, a{}CFP and Certified Professional Accountant, has another take on retirement savings. He says if someone does not have a good pension or receive defined social security benefits one million dollars might not be enough.

"20-years-ago the thought process was, if you have a million dollars then you don't necessarily have to worry about a plan in place, you're probably going to have enough money," says Hocutt.That's why he tells his clients to make the most of their 401k and benefits to try to save as much as possible.{} "It's on the individual to put their own money into those plans. You always want to put away in your 401k up to the match you're getting because that's free money you're getting from the employer."Hocutt also swears by the four percent rule in retirement planning. Especially for those wanting to live a steady life.{} "You could pull out four percent of assets starting the first year, and adjust it each year for inflation going forward, pulling out a little more each year. Assuming inflation goes up, and generally you would not run out of money over a 30 year time period," says Hocutt.He{}offers this advice.{} "Don't procrastinate, start putting back something. Start with one percent of your salary. Time is the biggest factor that's going to play a lot into this. So the earlier you can start putting back. The better it's going to be long term."Of course, when in doubt contact your financial planner and see which plan is best for your retirement goals.