How much should I save for retirement?

That question may very well be answered by another question, how much do you want to spend when you retire?

Before we discuss this in depth, though, let us stress that each individual's needs and situation are unique. Thus, one will do well to consult a financial adviser to get help in forming a portfolio size that will answer for your specific needs and wants.

You will also have to consider these factors when you are calculating how big your nest egg should be:

• Possibility of inflation eating up your savings, thus, the need to account for inflation in the amount you set
• Your current income and how much of it you're able to set aside for retirement
• What investments you now have and how are they doing
• The confidence level you want in ensuring that you don't outlive your savings

Generally, a safe amount to go for should be on how you can maintain your standard of living for the next 30 years after you retire at age 60. That is, you aim to save 30 times how much you want to spend in the first year of retirement. Deduct from this amount monies you can expect from other sources such as your Social Security retirement benefits.

Also, add to this amount the approximate cost of other activities you want to indulge in during your retirement. For instance, you may plan to go on a European tour or a month-long cruise to the Bahamas. These events should, of course, be placed into consideration when you compute for how much you will need when you retire.

So how do you reach your retirement nest egg?

Some recommend the 15% solution, particularly to those who are starting young. It is estimated that 15% of your gross salary now will grow to replace about 50% of your salary during retirement. But remember, this really depends on a number of factors such as how early you started, how long you stay at work and how big your salary is.

The larger your salary is, the higher percentage you will have to save. This is because your Social Security retirement benefits only provide you a limited amount in benefits and if you have a larger salary, you will need to save more of it in order for you to reach that amount when you retire.

Social Security will replace about 20 to 30% of your pre-retirement income if you are an average earned. However, the higher your salaries, the smaller the portion your Social Security is able to replace.

Again, there are no hard and fast rules here and the best way to determine how much you can save up is to go to a financial planner to help you.

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