How much do you think you’ll need to retire? That depends on a couple things.

1. What kind of lifestyle do you want?
2. What will it cost?

The answer to the first question is part dream and part reality. Most of us have a vision of retirement and one component of that vision is what we’d like to be doing and how we’d like to be living. The other component is the reality of of life. Needs (shelter, food and clothing) and what our society considers basics (transportation, medical, dental etc.). It’s a great idea to draft out your vision – what would you like?

The answer to the second question is a budget. What are the costs of your needs and basics? Will you own your home, be paying a mortgage, upkeep or rent? After you have incorporated all the elements of regular life, layer on the costs of the lifestyle you would like to have such as travel, gifts, new vehicles or activities.

Now you have an idea of the annual cost of retirement based on your vision. Remember, this is an after-tax number and your savings must generate enough monthly income after tax.