Step 1: Calculate the future value of the money you will need. If you are 23 and are planning on retiring at age 63. Assume you will live until the age of 90. In today's dollars, how much will you need each year for retirement? Choose based upon a realistic amount such as $50,000, $75,000, or even $100,000 per year. Calculate the future value of the answer in part D assuming a 3% inflation rate. You may also use a published current inflation rate.

Step 2: Calculate the present value of the money you will need for retirement. Choose two rates of return you would like to investigate. Chose a lower conservative number such as the current 3 year CD rate and chose a higher more aggressive number such as rate of stock return. You can choose whatever you want, but justify your answer. Include assumptions for your future pension (give info on how calculated such as SURS website, etc.) Subtract future pension flow from the Future Value needed in first year of retirement. Include assumptions for Social Security. Do NOT just say there will be no Social Security. Get into the Social Security website and figure what your SS would be at retirement. Subtract future Social Security flow from the Future Value needed in first year of retirement. Include your spouse in your calculations. Suggest doing columns in your spreadsheet for both since you will each have different pensions, Social Security, etc. After you have set up the income flows from pensions and Social Security, you will have the amount of money you still need per year. If you are VERY fortunate, you will have enough pension and Social Security to cover your annual income/expense needs. But most of you will need to save up a nest egg to use as an income flow over the years you retire.

Step 3: Calculate the annual amount you need to save up Take the number you calculated in Step 2, Part G above and divide it by 4%. 4% is the published percentage that most investment advisors agree can be taken out of a savings (401K, SEP, IRA, personal savings, etc.) per year. This is the amount you will need to save to achieve your retirement goals. Use the Present Value of Money to figure how much you need to save yearly using this total amount in Step 3; Part A. Use the two different rates of return: 3 year CD rate and a stock rate of return. Consider what stock rate of return you want to use. Use the number of years you have until retirement. Subtract any money you currently have saved up right now for retirement. Include 401Ks, IRAs, or any other money earmarked for retirement.