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Ah, retirement! We don't know of many people who aren't looking forward to a day when they can choose what they'll do with their time without it being dictated by a clock! Notice we said what they'll do with their time. "Retire" doesn't mean what it used to. The Baby Boomers just now hitting 65 are likely to stay active for a very long time.

Add in the sobering fact that the "over 85 gang" is the fastest growing segment of the American population, and you quickly realize the importance of investing for MANY "golden" years!

Consider these amazing statistics: The average life expectancy in 1900 was 47 years old. Today, a person reaching the young age of 65 may expect to live nearly another 20 years…or more. According to the U.S. Census Bureau, there are already more than 60,000 men and women who have reached the century mark. By 2010, that number will more than double to 125,000. And by 2050, more than 800,000 living Americans will reach that magic 100!

It's no wonder that one of the biggest concerns we hear from people is the fear that they will run out of money during retirement. We hear from diligent savers who saw their tax-deferred retirement accounts decimated in the last bear market and were forced to put off retirement. Even more often we hear from listeners whose debts match or exceed their retirement savings – like callers who regret that they bought that third car or vacation home, and now all of a sudden they don't have enough for retirement.

We hear from retirees and about-to-be-retirees who figure they'll be fine as long as they never, ever get sick, because more and more insurers are dropping coverage of unconscionably expensive prescription drugs, and employers are asking both current employees, as well as retirees, to pay a higher share of policy premiums.

One caller from Wisconsin hit the nail right on the head. He joked that he had enough for retirement as long as he didn't eat from Wednesday till Saturday each week. Funny, until you realize the SAD truth behind that statement.

So no matter how old you are, you need to think about this most basic of questions: Are you saving enough for retirement? We're going to help you answer that question right now.

The Dolans' Retirement Savings Worksheet

Let's roll up our sleeves and get to work. We promise it will be worth it. Our goals are to figure out approximately how much you'll need in retirement and whether you're on track to meet that.

Most people need about 70% to 80% of their pre-retirement income, plus another 3% or so every year to keep pace with inflation, so let's start with your average annual income. We recommend taking your income over the last five years and dividing by five to get your average. If you're anywhere close to retirement, this will be a very accurate measure. If you're still years away, it's worth doing anyway, realizing though that your income will change – hopefully for the better! – in the coming years.

Line 1 : Average annual income (last five years): $__________

Line 2 : Figure that you'll need 75% of that, so multiply line 1 by 0.75. 75% of your current income: $____________

Now, let's factor in inflation to give us a better idea of how much you'll need in your first year of retirement.

Line 3 : How many years until you retire? ____________ years

Line 4 : Multiply line 3 by 0.03 to give you a rough estimate of how much your income will have to increase to keep pace with inflation: %_________ (Note: We realize this is not true compounding, but the result is fine for estimating.)

Line 5 : Multiply line 2 by line 4 to get a ballpark figure for the amount you will need in your first year of retirement to maintain your present standard of living: $____________

Now we'll turn to the money you'll have coming in. There are a variety of income sources when you retire. Possibilities include:

• Tax-deferred retirement accounts
• Cash value on your home
• Investments
• Social Security
• Pension

Let's project the amount you can expect to collect annually. We'll start with Social Security. You can find how much you'll receive from Social Security on the statements you receive periodically. Call 800-772-1213 if you haven't received a statement, or request a statement at www.ssa.gov. You can also get a rough estimate with this calculator on the Social Security Administration site: http://www.socialsecurity.gov/OACT/quickcalc/index.html. (Interruptions in your career in which you made less or were not working will bring down the Social Security taxes you paid and hence the money in your Social Security account.)

Line 6 : Social Security annual benefit: $____________

Line 7 : Annual traditional employer pension (if applicable): $____________

Line 8 : Second-career income: $____________

Line 9 : Other income: $____________

Line 10 : Add lines 6-9 to get your approximate total annual income for sources other than your retirement account: $____________

Line 11 : Subtract line 10 from line 5 to determine what you need from retirement accounts each year: $____________

Retirement Account Calculator

Still with us? You're almost there! Now let's figure out about how much you'll have in your retirement accounts to see how close you are to having what you'll need.

Line 12 : List the average annual interest rate for your IRAs, 401(k), and any other retirement accounts combined: %_____________

Line 13 : Multiply line 12 by the dollar amount you save annually: $_____________

Line 14 : Multiply line 13 by the number of years until you retire (line 3) to determine the approximate value of your account(s) at retirement: $_____________

Line 15 : Enter your life expectancy at retirement (you can find this from tables listed at www.irs.gov or www.irahelp.com): _____________ years

Line 16 : Divide line 14 by line 15 to figure out the amount you'll be able to withdraw each year: $ _____________

Note : We haven't factored in compounding here. Your investments will compound within your retirement account as long as they are appreciating. We're showing you how to make simple, conservative estimates, which, given the ups and downs of the market, will put you on safer ground than making calculations that assume your investments will do well every year.

How'd You Do?

So, how does the amount you'll be able to withdraw each year (line 14) match up with the amount you'll need (line 9)? If you're close – or even have a surplus – congratulations! You're doing great.

If the result depresses you, don't worry! There are steps you can take to pick up the pace. We talk more about them in other articles ( see Catch Up On Your Retirement, the Dolan Retirement Plan, and Five Retirement Myths), but we'll give you the first and most important one right now.

Dolan Smart Money Move : If you're in debt, get out of debt! The natural inclination is to try to find investments that will give you a big return on your money. But in a sense, you will realize the biggest returns if you pay off your debts and stop paying out high credit card interest rates.

Invest as much as you can – even an extra $50 a month makes a big difference – toward your credit card bills. Start with whatever card has the highest interest rate first and pay off all debt that does not provide a tax deduction. Once you've done that, start investing extra – again, even $50 is great – toward your mortgage principal each month. Before you know it, your debts will be a bad memory!

Better yet, once you've paid off your debts, you may find that you need a whole lot less money to live a comfortable life—which could mean that your dreams of an early retirement could become a reality.