Like all planning, retirement planning requires that you have some goals. What kind of life to you want to have in post-retirement? It's not enough to say "I want to live the good life till the day I die." You need to be specific.

It is going to be tough to be specific if retirement is still thirty years away, but you can estimate. And as you get closer to the big R, you adjust your goals so they are more exact.

The first thing you need to figure is your retirement age. People are retiring later, so maybe it'll be age 70 for you. Maybe you've got some big travel plans after retirement and you want to retire at age 55. Whatever it is, your retirement age will help you figure how many years you are going to need retirement income. So, If you want to retire at age 65, and expect to live to age 85, you'll need 20 years of retirement income. Keep in mind, if your parents lived to age 100, it could be in your cards to also live to age 100. Having no money is bad, but just think how bad it would be if you had no money when you were 80 years old.

The risk of outliving your income is where annuities come into play.  Annuities keep paying an income no matter how long you live.

How much money will you need to cover 20 years of expenses? 

Besides how long you expect to live after retirement, the level of income you want will play a major role in how much you need to save.

Predicting your income needs at retirement are tough, but it gets easier the closer you get to retirement. Sometimes you hear that people should expect their retirement income needs should be about 80% of their annual income just before retirement. More and more though, people want to maintain their pre-retirement income 100%. After all, why should you reduce your standard of living just because your fashion sense has been diminished?

Retirees usually don't have the same expenses as younger people. They may no longer have a mortgage, and they likely don't have to fund college education for kids. However, other expenses increase. Retirees have higher health care costs. They could also see increases in traveling expense (enjoying the golden years), dining out, and gifts to family.