Does retirement scare you?

You’re not alone.

According to the National Institute on Retirement Security, “50% of Americans between the ages of 55 and 64 have less than $12,000 saved [for retirement].”

Most people who are old enough to retire don’t even have enough saved to pay for 3 years of groceries, let alone cover the most expensive third of their life!

But you’re reading Modest Money, which means you’ve already started investing in your most important asset: yourself.

This gives you an incredible advantage and I want to help.

I’m going to share with you a fool-proof method for determining how much you need to save (and how much you need to start saving) in order to live your golden years the way they were meant to be lived.

It’s accurate, it’s easy and it takes less than 10 minutes!

Let’s get started.

Don’t Reinvent the Wheel- Use Online Calculators

Using an online calculator is by far one of the fastest and most accurate ways to estimate how much you need to save before retirement. You want one that lets you estimate and defend your own assumptions, such as the one on MSN.

As you input your specifics, here are a couple of tips that help to keep in mind:

Always over-estimate your life expectancy (you don’t want to out-live your savings!)

Always under-estimate your returns (this helps protect you from market turns and recessions)

For help determining what your pre- and post-retirement returns should be, here are some historical returns that different investments have yielded:

Stocks and index funds can give returns around 9%, but they only make money seven out of every ten years. This makes them great for pre-retirement, but bad for post-retirement.

3-Year treasury bills have returned only 3.5%, but they’ve made money every year over the past 85 years! This makes them poor for pre-retirement, by great for post-retirement.

Avoid Unnecessary Taxes

Note: Skipping this step alone can cause your retirement to go from luxurious to strapped-for-cash.

The government has created tax-sheltered programs to help you along on savings journey.

First, utilize your employer’s ‘match’ to the fullest. This usually comes in the form of a 50-100% cash match within a 401(k) or 403(b).

If you still have more you need to invest, consider either a traditional IRA or Roth IRA.

Here’s the differences:

If you’re planning on being super rich in retirement (yay!), then you’ll want to put your excess savings into a Roth IRA. Roth IRAs charge you taxes now (when you’re making less) rather than later (when you’re uber-wealthy).

If, on the other hand, you think you’re going to cut back in retirement, then you’ll want to invest a traditional IRA. Traditional IRA’s do the opposite of Roth IRAs (ie. they tax you now when you have less).

Tip: Use Blooom to seamlessly and automatically manage your retirement accounts.

Shoot for the Moon!

Have you ever heard the phrase, “Shoot for the moon, so even if you miss you’ll land among the stars?” That’s the kind of retirement we all want.

Let your retirement goal act as a minimum and always look for ways to throw a few more pennies into those tax favored plans.

Bonus from work? Maybe put a bit towards the retirement fund.

Kids just moved out? Perhaps this is a good time to down-size.

Even though it may not seem like much, little changes over long periods of time make a big difference.

Mistakes to Avoid

A personalized retirement plan requires a competent coach and advisor to alert you of any risks in your investments. One of the biggest mistakes is getting started before you’re ready.

If you have outstanding debt or no emergency fund, then you need to tackle these hurdles first. After all, nothing destroys a great investment faster than withdrawing it early to fix the car’s broken transmission.

If you’ve tried budgeting and it either hasn’t worked or it took too much time, chances are you were doing the wrong kind of budget.

Stay focused, stay disciplined and you will hit your goal every time!

Kevin Shryock is a financial coach and motivational speaker. His mission is to empower and challenge others with inspirational instruction, so that they can take control of their lives and money.

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