U.S. workers say they expect to enjoy about 23 years of retirement, according to a recent survey.
Most, however, will not be financially ready when their working days are over.
When you retire, you can expect Social Security to replace about 30 percent of your pre-retirement income. But you may need up to 70 percent of your income to maintain the lifestyle you had prior to retirement.
So, where does the rest come from? Company-sponsored pension plans make up some of the difference. The rest, however, must come from your savings.
Here is a sketch of an actual retirement plan drawn up by Roy T. Diliberto, president of RTD Financial Advisors Inc., a financial planning firm in Philadelphia. It's for a couple who now make about $80,000 a year.
It illustrates in a dramatic way how it is important to start planning early.
The man is 39; his wife is 32. Each plans to retire at age 60. They want retirement income of $48,000 a year in today's dollars. With an annual inflation rate of 5 percent, that would be about $133,000 by the time they retire. And they want their retirement income to increase each year with inflation.
To earn that amount, they will need to amass by retirement about $1.4 million in income-producing assets, even after Social Security and company pension plans are counted.
They have current assets, mostly real estate, of about $145,000, which Mr. Diliberto says will grow to about $398,000 by the time they hit 60. They also will have an estimated $395,000 in 401(k) plans and annuities.
That would leave a shortfall of about $600,000.
To reach their goal, the couple must save about $1,000 a month, and that money must earn about 8.5 percent a year, Mr. Diliberto said.