Several ways to figure out if you'll have enough to retire

The footprints of an aging America are hard to ignore, especially with the leading edge of the baby boom generation reaching its retirement years. Maybe that's why I've been getting a number of questions from middle-aged readers and listeners with a D.I.Y. mind-set about how to take a quick reading of their retirement planning (often with a nostalgic thought for early retirement).

Well, there is no magic number, no simple formula for figuring it out. How much money we'll really need to live well when we're old is unknowable. Perhaps more accurately, it's one of former Defense Secretary Donald Rumsfeld's "known unknowns."

But there's no reason to succumb to despair despite all the imponderables. Most people should find themselves in decent financial circumstances with room for maneuver late in life by following some basic savings strategies, taking a broad perspective on investment and working longer than the traditional retirement age.

Fact is, by thinking through what the good life really means to them, future retirees will come up with sensible answers to the question "How much is enough?"

That said, there are several ways to take a quick check-in. For instance, there is no shortage of websites for running your retirement figures and coming up with some crude guesstimates.

All the major mutual fund companies like Fidelity and T. Rowe Price offer retirement savings calculators. I like the offerings at the website choosetosave.org. Bloomberg.com has a good collection of retirement calculators, too, at www.bloomberg.com/invest/calculators/index.html.

To be sure, many financial advisers disdain these calculators because it's nothing but a snapshot. I still think the information is useful, but, much like a stock's price/earnings ratio, it's only an indicator for further research and shouldn't be taken too literally.

Hammond figures corporate employees need to come up with 60 percent of their preretirement income during their post-working years from their 401(k) plans. (Social Security fills in the remainder of the gap.)

How will you know if your nest egg will cover 60 percent of preretirement income once you stop working? If you're 35 and plan to retire at 65, you need 2.1 times your salary to be on track. By 45, you had better have 3.6 times. At 55, the multiple rises to 5.4 times. And by the time you retire, you'll want it to be 7.7 times.

I took these numbers from a BusinessWeek July 23, 2009, story about Hammond's ratio, "Sizing Up Your Nest Egg." In a far more detailed study, "Staying on the Path to a Secure Retirement: Using the Asset-Salary Ratio as a Retirement Compass" at www.tiaa-crefinstitute.org/articles/rd_assetsalaryratio1209.html, Hammond and his colleague David P. Richardson explain their reasoning.

Still, after spending some time with quickly generated financial ratios, it pays for the DIY set to delve far more deeply into their future retirement situation. You can get a much more realistic picture of your financial position by spending time at far more sophisticated -- and demanding -- financial planning websites such as www.analyzenow.com and www.esplanner.com.

And even though I'm skeptical in many cases that working with a financial planner is worth the expense for most middle-income families, their knowledge can be invaluable at a major transition point like retirement.