Getting a handle on your future financial needs is one of the hardest parts of the retirement planning process, because there are so many variables in the mix. It's long been popular to assume you'll need about 70% of the salary you're making just before you retire, each year throughout your retirement. It would be great if it were that simple. But it's a bit more complicated.

The amount you'll need depends on the lifestyle choices you make. Some retirees become expert downsizers and are perfectly happy getting by on less than 50% of their former income. They sell their homes, move to states with lower taxes and expenses, and generally live frugally. Others want to really live it up-drive a new car, travel the world, eat out all the time-and may require the same income in retirement as when they were working.

Let's face it, when you're contemplating something as far into the future as annual retirement income, it all comes down to an educated guess. But that's OK. You can always re-evaluate your goals every few years, and then adjust your strategy as you get closer to retirement.

So here's what you need to do: Based on how much you think your lifestyle and expenses will change starting the day after you retire, compared to your lifestyle and expenses prior to retiring, estimate what percentage of your pre-retirement income you'll need each year during retirement.

To narrow your choices, let's break it down to three ranges (in each case, the numbers refer to the percentage of the income you'll be earning just before you retire):

1. 1. Under 50%
2. 2. 50% to 70%
3. 3. Over 70%

While you're getting ready to throw your dart, here are some things to keep in mind about the cost of retirement:

• Some of the biggest "retirement shortfalls" occur because of inflation. It may look like you will have enough income when you retire; however, what money will buy in the future is a lot less than what it will buy today.
• Your income will likely continue to grow between now and retirement.
• Your lifestyle and expenses may grow at the same rate as your income, or slower.
• If you retired today, you'd need all of your income to maintain your current lifestyle. But many years down the road, you may not need to spend all your income as much to maintain the same lifestyle because your salary will have grown.
• Some expenses may go down, including housing, clothing, taxes, and meals.
• Some expenses may go up, including health care, insurance, recreation, and travel.
• Life spans are increasing. You could spend 30 years or more in retirement, meaning your money has to last a long time.
• Recent polls suggest retirees tend to underestimate their income needs.

A lasting impression:
Once you generate an account savings projection using the Plan Savings calculator, link over to the Retirement Income calculator to determine just how long your projected savings may last in retirement. Both are available in the Calculators section.