by Shana McK.

Created on: February 06, 2009   Last Updated: March 03, 2009

How you choose to spend your retirement greatly affects how much money you will need. While many financial websites and financial gurus give a general you need 60-70% of your current income to maintain your current cost of living' rule-of-thumb, it really depends on how and where you plan to spend your retirement. Someone who currently lives in New York City and plans to live there in retirement will most definitely need more money than someone living in Montana or Costa Rica.

If you plan on travelling, whether domestically or internationally, you will need more money possibly more money than you earn in a year now. Plans to travel in retirement significantly raise the amount of money needed for retirement.

Another thing to consider is health care. In the United States, it is estimated that a married couple retiring today will need nearly a quarter million dollars to cover health care expenses. In addition, this amount only covers basic health care, not over-the-counter medications or costlier services like long-term care, according to MSN Money. This expense will be higher for those now in their 20s and 30s, as life expectancy continually rises.

Many people in their 40s or younger have debated whether or not social security will still be around when they reach official retirement age. This is a valid concern given the number of Baby Boomers now reaching retirement age, and the fact that the social security fund is an already strained fund. In light of this, younger people need to save greater amounts of money for retirement.

For a while, it was popular to dream of having $1mln for retirement. However, theoretically being able to retire with $1mln today doesn't translate for the future. The Motley Fool has a wonderful calculator on their website, which calculates how much $1mln translates to in the future. A 21 year old, may need an estimated $11.5mln.

To help calculate the cost of retirement, using an online retirement calculator is a very useful tool. They can estimate what the value of a retirement portfolio x number of years in the future, and how long that money will last over a specified period of time.

In all, saving for retirement needs to be approached based on when retirement is planned, what activities will be pursued, and life expectancy. Planning soundly for retirement is crucial, so that a person does not outlive their assets.

http://www.pbs.org/wgbh/pages/frontline/retirement/w orld/whycost.html

http://articles.moneycentral.msn.com/Insurance/Insur eYourHealth/YourRetirementHealthCareBill200000.aspx

http://www.fool.com/personal-finance/retirement/2007 /06/25/a-million-bucks-aint-enough.aspx

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