Wouldn’t it be great if a financial advisor could tell you exactly how much you need to save for retirement? Of course it would!

Unfortunately, that’s not possible… because how much money you’ll need in retirement—just like how much you need right now—depends not on a one-size-fits-all formula, but on something that fits only you: your goals.

Some goals, such as continuing to live in your own home, may be relatively easy to accomplish, especially if you’ve already paid down or even eliminated your mortgage. Other goals, like buying a sailboat, for instance, will require money… perhaps even a boatload.

So, what’s a person to do? Here is a five-step process to consider.

Step 1: Dare to Dream. 

The first step is getting in touch with your dreams. Not what family or friends say you should want. Not what magazine ads or highway billboards show you should want. Not what well-intentioned authors or trusted advisors declare you should want.

Many of us go through life listening too closely to messages from others, including our own family and friends, often forgetting that our most meaningful dreams don’t come from outside sources, but from within.

Start by asking yourself, “What do I really want?” Then listen to what you have to say. Better yet, grab a pen and paper (or the nearest keyboard) and write down what you hear.

Do you want to sail the world? Or would you rather stay at home and be close to your grandkids? Or maybe you’d like to write a book, learn to speak Spanish, start a new club or finally begin to paint?

Perhaps your retirement dreams include more tangible assets: a 3D TV, a new vehicle or a second home. Perhaps you’d also like to make a difference in the lives of others, or leave a legacy for those you care about.

Write down whatever comes to mind without worrying about whether you have the money, time, talent or motivation to achieve it. Don’t be concerned if your ideas seem silly or wildly extravagant.

Also, don’t shortchange yourself by thinking too small. Instead, add two zeroes to your dreams, like turning 1 into 100. This amps up your dreams so that they will hold your excitement in the years and decades ahead. For example, add two zeroes to “buy a sailboat,” and it becomes “buy a sailboat and sail around the world for a year.” Add a few more zeroes and your goal might also include inviting a dozen friends to join you.

Try to list at least 100 things. If you’re having trouble, ask family and friends what they think makes sense for you, or what they’d put on their own list. Magazines are also good sources of ideas, so are “bucket list” sites. However, be sure to keep your values top-of-mind: What’s right for others may not be right for you.

Step 2: Ready, set … choose.

While it would be great if we could realize all of our dreams, that’s likely not possible. Instead, we have to choose. Retirement, perhaps more so than any time since we became adults, is a time filled with choices. We must choose when we’re going to retire, where we’re going to live, what to keep with us and what to let go of. And while some of these choices may be easy, others can be heart-wrenching.

But there is also good news, as retirement offers us the chance to choose new goals that may not have been realistic during our working years.

To start honing in on what goals are right for you, look over your dream list and ask yourself, “If I could do 25 things in the next 25 years, what would I do?”

Step 3: Get SMART.

Now that you have a clearer idea of what you want to do, it’s time to set some actual goals. Look over your list of ideas and pick a handful that you feel ready to act on. Whether short- or long-term, be sure to make your goals SMART.

SMART goals bring structure and accountability into play, turning vague ideas and unrealistic daydreams into well-defined statements of intent. SMART goals are: 

  • Savvy. Easy to understand and meaningful to you. An example could include, “find out if an annuity makes sense for my retirement.”
  • Measurable. Define exactly what needs be done. “Interview three financial advisors," provides specific and measured direction. 
  • Active. Feature an action verb. "Increase my 401(k) contribution,” is a great example of goal that requires you to take action in order to accomplish.  
  • Reachable. Require yourself to stretch. For some, saving $5,000 three of the next five years, could be considered an achievable stretch goal.  
  • Timed. Have a specific deadline by which you can say, “I did it!” “Retire on my 70th birthday” is an inspiring - and date-driven - goal. 

Step 4: Determine the cost of your goals.

Some goals, such as “be a better friend” or “walk 10,000 steps a day,” can be achieved at no cost. Other goals require money—often more than we expect, and maybe even more than we can realistically afford. Think back to that sailboat, for instance. Not only will you need money to the buy the boat, you’ll also have to pay for insurance, maintenance, storage, taxes, dock fees and more… each year.

So, before truly committing to your retirement goals, be sure you understand the costs involved. Also consider your sources of income.

Keep in mind the typical retiree today spends about $46,000 a year,1 yet the average Social Security payout is only around $16,000 per year.2 So, if you have a lot of goals, or even a handful of pricey ones, you’re going to need other sources of income.

Once you have a good sense of your income and expenses, it’s time to create a budget. Many people consider “budget” a four-letter word, but I view budgeting as an important tool for peace of mind. I use my budget to ensure I have the financial resources to achieve—and more importantly, enjoy—the retirement goals that are important to me. As a result, I spend less and save more. It’s why I recommend you create a personal budget, in whatever level of detail works for you.

Step 5: Bring it all together in a financial plan.

Once you’ve created your budget, you may discover the cost of your goals is going to exceed your financial resources. Don’t despair. Instead, develop a financial plan. Like many other things in life, your financial plan can be as simple or as complex as you make it. I suggest including three key things:

  • Your major goals/expenses such as paying for your children’s or grandchildren’s education, buying a second home, or retiring
  • Your personal net worth which gives you a snapshot of your assets and liabilities
  • A cashflow analysis to help you see your monthly income and expenses and determine how much you can save toward the cost of your goals

With your plan in hand, you’ve got a realistic and strategic roadmap to pursue the dreams you identified in Step 1. Now, all you have to do is “get goaling!”

Read more about the importance of goal setting in The Secret to Goal Achievement.  


1 Motley Fool, "If $1 Million Is the Magic Retirement Number, Most Older Americans Are Nowhere Close," March, 2018.  

2 Paul N. Van de Water and Kathy Ruffing, Center on Budget and Policy Priorities, "Social Security Benefits are Modest," August 7, 2017.


The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.


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