Retirement-What should I do first?

The path to a successful retirement starts with creating an overall plan

To live well in retirement, you can no longer rely on the largesse of a company pension plan or Social Security. Instead, you will have to depend on how skillfully you plan and invest, and whether you make good use of tax-advantaged savings plans such as 401(k)s and IRAs.

First, estimate how much you will need. One rule of thumb is that you'll need 70 percent of your annual pre-retirement income to live comfortably. That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office goodbye. But if you plan to build your dream house, trot around the globe or get that Ph.D. in philosophy you've always wanted, you may need 100 percent of your income or more. Remember, too, that your health care expenses are likely to go up in retirement, if only because you'll be paying more for insurance.

Second, figure out how you'll meet those expenses. There are three main sources of retirement income: Social Security, pensions and annuities, and your savings. Start by determining your estimated Social Security benefits. Next, add in any annual payouts you expect from an annuity or company pension.

If it's not enough, it's time to think about where that money will come from. Count on needing at least $15 to $20 in investment savings to cover each dollar of that shortfall. If your projected retirement expenses exceed Social Security and pensions by, say, $20,000 a year, that means you'll need a nest egg of $300,000 to $400,000 to bridge the gap.

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