Retirement planning varies by individual, but one of the most critical factors that influence the decision is whether one is financially ready to retire. Experts opine that you will need about 80 percent of your pre-retirement income to maintain your current quality of life.

Some important questions that might influence your retirement planning include:

• At what age do I want to retire?
• Will I participate in an employer’s retirement savings plan, such as a 401(k) plan, or a pension plan?
• Will my spouse or partner retire at the same time?
• Where will I live when I retire? Will I downsize, rent, or own a house?

If you are seeking the elusive answers to these questions, it is time to use a retirement planning calculator. A retirement planning calculator will help you devise a customized retirement plan, based on your income and goals.

The amount required for a comfortable retirement is considerably more significant than it was for the previous generation.

A retirement planning calculator can determine what your income will be at the time you retire by growing your current income at an annual rate of let’s say 3.8% (which factors in an inflation rate of 2.3% and salary growth rate of 1.5%). This helps you in figuring out how to have enough income to live comfortably when you stop working.

On the assumption that one can live comfortably off 85% of the pre-retirement income if you are earning $100,000 the year you retire, the calculator estimates you will need $85,000 during the first year of retirement.

The first step is to create a budget – keep a detailed written or computerized monthly budget. It might seem intimidating, but creating a realistic estimate of your current status can help you get where you want to be in the future.

Simply begin noting and tallying your monthly expenses. A 30-year study by Harvard Business School has shown that 3% of participants who wrote down goals produced ten times the results when compared to 83% of participants with no defined goals.

Keep track of fixed monthly costs such as phone, car, housing, student loan payments. Add to this amount, the monthly average of variable expenses such as food, utilities, credit card bills, clothing, and entertainment, and you will have a reasonably accurate idea of your monthly spending.

Now you know how much you will need in savings to maintain your current lifestyle after retirement, but this amount will obviously not remain static. If you fail to account for the impact of inflation properly, you will underestimate your retirement saving needs.

Inflation accumulates gradually – prices go up in one area such as foodstuffs, and later in another such as housing. Over a period of years, these price increases can have a profound effect on how much money you will need after retirement.

So, the income needed will increase by 2.3% every subsequent year to keep up with inflation. Don’t be intimidated though! Many current expenses such as payroll taxes will also disappear.

Besides inflation, a calculator will also factor in social security since that income will reduce the amount you would need to save. Social security benefits calculations work on the assumption that you would start collecting benefits at age 67 after having worked for more than 30 years.

Besides social security, there are pension plans, retirement savings plans such as your employer-sponsored 401(k) and IRAs (Individual Retirement Accounts). Money-market accounts and CDs can be used for risk-free savings at the best interest rates available.

The retirement calculator can help you to determine how much your money will be worth after you factor in these diversified benefit formulas that account for inflation in the long term.

Another simple yet often overlooked way of saving is to examine all unnecessary periodic spending. For example, your daily takeaway coffee, subscriptions to magazines you don’t read, etc. Add this amount to the calculator and take a look at the total over a ten-year period. You’ll be amazed how these innocuous expenses add up!

Once you have used your retirement planning calculator to have your calculations in place, experts recommend starting as early as possible and to keep saving without interruption. The earlier you start putting numbers behind your plans, the earlier you can retire.

Using your retirement calculator on a regular basis is an easy, sure shot, a way of keeping tabs on your long-term financial progress, without getting befuddled by complicated math.