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Section: RETIREMENT Are you saving enough for retirement? Our 10 steps will help you finance the lifestyle you've always wanted. As you approach retirement, it's easy to become fixated on the magic number-a pot of money large enough to allow you to retire comfortably without outliving your savings. But figuring out whether you can afford to retire requires math, not magic, along with a thoughtful analysis of how you plan to spend your time and money. On the following pages, we'll help you come up with a realistic estimate of how much money you'll need to retire in style. // Plenty of online calculators will help you figure out whether you can afford to retire based on the amount of money you'll need to replace a specific percentage your current income. A popular rule of thumb, for example, suggests that you should plan on replacing 70% of what you currently make, or 80% if you want to live large. But this guideline is deeply flawed, financial planners say. During their early years in retirement, many retirees end up spending as much as or more than they did when they were working, says Jennipher Lommen, a certified financial planner in Santa Cruz, Calif. // However, if you were to move to a lower-cost area, say, or stop supporting adult children, your living expenses could drop in retirement. When you retire matters, too: If you retire before age 65, for example, you'll need to figure out how to pay for health care before you're eligible for Medicare. To come up with your own magic number, you need to figure out how much you'll actually spend in retirement, which means coming up with a comprehensive retirement budget. Only then can you determine whether your savings and other sources of income are sufficient to finance the lifestyle you've envisioned You'll also need to estimate how long your money will need to last. You may have heard of the 4% rule. which is considered a safe withdrawal rate for a 30-year retirement that might include a bear market and periods of high inflation. Under this rule, you withdraw 4% from a diversified portfolio in the first year of retirement and adjust the amount annually by the previous year's rate of inflation. For example, with a $1 million portfolio, your first year's withdrawal would be $40,000 (see "Harvest the Fruits of Your Savings." Oct.). In the Kiplinger's Personal Finance article Plan Now to Retire Worry-Free by Sandra Block, when analyzing how much you will need to retire, it is an accurate guideline to calculate, based on your current income, 70% of what you currently make to live comfortably, and 80% if you want to live a little more extravagantly. Select one: True False

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