Mellody Hobson's Q&A on Saving for Retirement

March 6, 2007 — -- For baby boomers, retiring can be both a blessing and a curse. While the idea of not working can sound sublime, it also means that financial preparations should have been made years in advance. But according to "Good Morning America" financial contributor Mellody Hobson, with a little planning and a lot of saving, you can live a financially secure life in your golden years.

Q: Is there a magic number or formula we can use for calculating how much we will need in retirement?

Unfortunately, there is not a silver bullet for retirement. Everyone's formula depends on a number of factors, such as current age, intended retirement age, life expectancy, risk tolerance, inflation and most of all, health.

Generally, the savings target for retirees should be between 80 to 90 percent of your preretirement income. Statistics show that a healthy retirement savings nest is one which your annual withdrawal is 6 percent or less.

Q: Eighty or 90 percent sounds like a lot. What does that mean in real dollars a month?

Again, this depends on your current income and lifestyle you desire in retirement. For example, if you make about $50,000 a year, you would need to have roughly $840,000 saved for retirement to maintain a similar standard of living.

Depending on the number of years you have until retirement, how you get to this $840,000 can vary dramatically. For example, if you have 35 years left until you retire, you would need to save about $400 a month -- assuming an annual rate of return of 8 percent.

If you have 25 years remaining, you would need about $958 a month and if you have only 10 years remaining you would have to put away roughly $4,800 a month.

Q: What about those of us who haven't saved as much as we should and are getting close to that 10 year number. What can we do?

It is a pretty daunting statistic: According to the Employee Benefits Research Institute, by 2030, the annual shortfall between the amount retirees need and the amount they will actually have will be at least $45 billion. The fact is, 50 percent of workers do not have any retirement savings.

First and foremost, make a commitment to decrease your spending and increase your savings. Even an incremental up-tick in savings can make a significant impact over the long term. For example, if you currently save $3,000 a year, over the course of 15 years, you would have saved about $88,000, assuming average annual returns of 8 percent.