How much should I save?

“As much as you can” is the standard advice. Many financial planners recommend that you save 10% to 15% of your income for retirement, starting in your 20s.

But that’s just a general guideline. This is your retirement we’re talking about, so it pays to get a little more specific by doing your homework up front. It’s a good idea to establish a savings target – one that tells you roughly how much you should set aside over time to meet your retirement goals.

The best way to determine your savings target is to use an online calculator like this one. It will help you figure out how much you should accumulate and how much you must set aside in the meantime to reach that target. Be sure to update the calculation each year, so that you can see if you’re on track.

As a general rule, you’ll need at least $15 to $20 in savings to cover each dollar of the annual shortfall between your income and your expenses. So for example if your projected retirement expenses exceed Social Security and pensions by $20,000 a year, you might need a nest egg of $300,000 to $400,000 to bridge the gap.

What if I can’t save enough?

Try to divert as much of your earnings into savings as you can. If you don’t have a budget, create one. If you do have a budget, revise it to reflect your newly urgent commitment to saving, as well as any changes in your spending since your last outbreak of budget fever. Chip away at wasteful habits – that might mean ditching expensive dinners or unused gym memberships.

If you’re still young and you can’t save enough right now, don’t be discouraged. Your income will probably grow as you progress in your career, allowing you to save more. You might also have other opportunities to boost your savings rate; for example, a bonus or inheritance can make a big difference in your long-term prospects if you invest some of the money in retirement accounts.

How can I reduce the amount I’ll need?

The most obvious way is to rethink your standard of living in retirement. Swapping the around-the-world sailing trip for a Caribbean cruise may help you lower your retirement target to a more attainable goal.

You can also delay your planned retirement date from, say, 62 to 68 or so. Working past the traditional retirement age will let you postpone withdrawals from your retirement accounts. Your savings will have more time to grow, and you’ll reduce the number of years you’ll need to draw on them. Working longer may also let you delay taking Social Security until you reach at least full retirement age (66 if you’re 50 today), potentially increasing the size of your monthly benefit by 30% or more.

The great thing about online retirement savings calculators is that you can play with the numbers to see exactly how much more or less you’ll need to save based on when you plan to stop working, or how much you’ll spend in retirement, or any number of other factors.

Working part-time can help too. But the problem is that you don’t know if you’ll have the interest or energy to work at an advanced age – or if you’ll have health problems that prevent it. You also may have a tough time finding an employer who wants to hire you in your later years for the amount of money you want to earn. So pinning your entire retirement strategy to working in your 70s or beyond isn’t such a great idea.

What if I’m running out of time?

If you find yourself running short on time – say, you’re in your 40s or even your 50s, and you haven’t gotten started yet – there are still a few things you can do. The key is to do themnow.

You should first max out your contributions to tax-favored retirement accounts like IRAs and 401(k)s. For 2012, the IRS allows $17,000 for a 401(k) (though your employer may impose lower limits), and $5,000 for traditional and Roth IRAs. If you’re over 50, you can contribute additional catch-up contributions. Even the government understands that this is crunch time, and it has devised a few ways to help you out.

For example, workers age 50 and older can put more money into IRAs and workplace retirement plans than younger savers can. That means you can and should contribute an additional $5,500 to a 401(k) and $1,000 to traditional and Roth IRAs.

If you’re arriving late to retirement planning, a traditional IRA may be a better choice than a Roth.

I’m saving a lot but will still fall short – what now?

Consider other alternatives that can reduce how much you need to save. The most obvious one: Think about delaying retirement by a few years. That strategy will allow you make more contributions to your retirement accounts while postponing withdrawals – which could significantly increase the size of your nest egg even as it reduces the amount you need to accumulate to make it through retirement.

For example, if you retire today at age 65 with $500,000 in retirement savings and withdraw $43,000 a year, your savings likely would last until you reached age 90. But if you delay retirement for another five years and max out your IRA contributions during that period, you would retire at 70 with $772,680 saved. That nest egg would let you withdraw $72,000 a year until age 90. (Calculations assume an 8% annual return on your investments.) So by delaying your retirement just five years, you can increase your retirement income by nearly $30,000 a year.

Getting a part-time job after you retire also can make a big financial difference – and can provide mental, physical and emotional benefits as well. Other options include trading down to a less-expensive home (you can invest the profits toward retirement), reining in your spending or transforming the equity in your home into income by taking out a reverse mortgage – though high costs mean this last option is a good idea for only a small number of retirees.

When can I retire?

Trying to figure out whether you can afford to retire is like putting together pieces of a financial jigsaw puzzle. First, you need to estimate how much you’ll spend in retirement. Then you must consider the income you’ll collect in retirement frompensions and Social Security – as well as the amount you can afford to draw from your personal savings or other sources.

The idea is to assemble the various pieces, and then see whether the picture of retirement life that emerges is acceptable to you.

To help bring the retirement picture into better focus, try plugging all your pertinent financial information – including pensions, Social Security, retirement investment accounts and anticipated retirement expenses – into an online calculator. The calculator can crunch all the numbers and assess your odds of being able to retire on the schedule you envision.

Revisit the calculator and all the different pieces of the puzzle each year, in order to make sure you remain on track.

H/T Source: CNN Money