One of the most challenging aspects of retirement planning is deciding what kind of retirement you would like. What are you spending this year for basic needs? How much are you spending to maintain your lifestyle? How much money will you need each year in retirement to maintain this type of lifestyle? Is this amount more or less than what you are currently spending? When you retire, will you stay in the same home? Will you downsize, or will you move to another location? If you move, how much will you be able to pay for the new home? These are not easy questions, but they are important questions.

Your assignment is to make a first pass at answering these questions. Using Learning Tool 6: Retirement Planning Needs Worksheet, determine how much you must save each month to achieve your specific lifestyle at retirement based on your estimates of years until retirement, expected return, inflation, and tax rates.

To see the impact of inflation on the amount you must save, increase your forecast for inflation by just 1 percent both before and during retirement and see how much this affects the amount you must save each month. Likewise, decrease your forecast for inflation by 1 percent both before and during retirement and see how much this affects the amount you must save each month.