Question: My wife and I both have accounts at BUYandHOLD including our IRAs. We are trying to determine how much money we'll need when we retire. We're in our mid-forties.

Michael

Answer:

Dear Michael,

You're smart to start thinking about this now, rather than when you hit 60.

There is no one-size-fits-all answer, but here are several steps to get you started toward finding the right answer.

Step #1. Add up your expenses for 2003. Then, subtract those you think you won't have in retirement, such as a business wardrobe and commuting costs. Add in any new post-retirement expenses -- perhaps you'll travel more in your free time.

Step #2. Factor in your retirement housing decision. Will you stay in your current home? Sell it and move to a smaller, less expensive place? If you opt for cheaper living, then that will change the bottom line in Step #1.

Step #3. Once you reach this theoretical "retirement" amount, live on it for three to six months. It will give you a first-hand feeling for how much you'll need to be comfortable. Perhaps you'll manage just fine. On the other hand, the amount may turn out to be too small.

Step #4. Then add up your estimated monthly Social Security retirement check (get an official estimate by calling 800-772-1213 or logging on to: www.ssa.gov), any pension, 401(k), and IRA benefits and your personal savings.

Once you've done this number crunching, use the Ballpark Estimate Calculator to come to a more refined decision. You'll find this calculator, put together by the non-profit American Savings Education Council, at: www.asec.org/ballpark. It's a one-page worksheet that requires knowing your current annual gross income, the percentage of that income you would like to have to live on in retirement (guidelines are provided), your estimated income from Social Security and retirement accounts, income from other investments and any part-time income you think you will earn in retirement.

Additional calculators, covering all aspects of retirement, including how much you'll need to take out of a traditional IRA are at: www.fundadvice.com/tools/calculators.

Good luck!