In a recent study, more than 2/3 of the small business owners who participated, reported that they “have developed an estimate of their retirement needs” but they “have no written retirement blueprint” –Investment News Article dated March 12, 2012, written by Muneeza Iqbal

Most of us do not bother to perform the retirement needs calculation. It’s intimidating and depressing, or so we think, so why endure the process. I remember doing my retirement needs calculation many years ago, and the calculator told me I needed to save just a tad more than I earned at the time, to reach what I considered very moderate retirement goals.

Today, thanks to the benefit of experience, I take a different approach. The fact is, that no matter how large or small your nest egg is, the vast majority of retired people depend primarily on social security for their income. In other words, the retirees with a substantial nest egg are not spending it, or only take very little to supplement their social security.

Maybe the better approach is to not try to figure out how much you will need in retirement. The better approach is to have the expense side covered, rather than to worry or focus on the income side. One clear primary goal is to retire debt free. Interest expense is damaging to your fiscal health. We should plan to have our homes paid off, or be in a reasonable position to downsize in retirement to ensure that no mortgage is payable.

The pre-retirement challenge then, is to budget and manage cash flows to achieve these two goals; purchase a house that can be paid off prior to retirement, or at least have enough equity to downsize with no mortgage payable, and have student loans and credit cards paid off.

With these two factors in place, retirement is no longer a challenge. Social Security will cover your needs in terms of car and groceries with ease.

Of course, we don’t just want to get by during our golden years. We want certain luxuries, like hobbies and travel, gifts for grandchildren, and more. The 401k and IRA is the ideal vehicle for this type of savings. Seen from this perspective, retirement savings are a way to improve retirement and provide a higher standard of living. In this case, every dollar makes a difference because it provides disposable income. Suddenly saving for retirement is fun, because we are really saving for that nice car, the Alaska cruise, and all of the other things we want to do.

We aren’t saving for retirement for our survival. We don’t have to save more than we earn or we’ll be paupers. It’s not a hopeless cause. Whether we save $50 per month or $500 per month, retirement saving will significantly improve our quality of life and it will provide luxuries that we will enjoy.

So, why save for retirement? For the security and joy that additional resources bring.

(We are focused on social security and medicare reform efforts and will update our insights accordingly).