If you plan to retire at age 65, you might project that you'll live another 20 years. If you spend accordingly, that's fine if you kick the bucket when you're 85. But if you live past 85, you'll run out of money. A more conservative plan would be to project that you and your sweetie will happily live out your old age to 95 or 100. After all, it's better to live a bit more frugally and have money left over than the other way around.

By the time you're retired and getting ready for the good life, your 30-year mortgage will most likely be paid off. You won't have the expenses of commuting to work, a work wardrobe and the dry cleaning it requires. Expenses that may increase are medical and dental costs. Project what your expenses will be, and add in a contingency amount of 10 to 15 percent to come up with a monthly figure you'll need to live on. Costs will go up. However, your investments will increase in value, so your income will too -- at least that's the theory.

## Determine Your Sources of Income

Define what sources of income will continue once you're no longer working. Social Security and company pensions are two streams that should continue as long as you continue. However, the bulk of your retirement funds will most likely come from your own savings and investments. Once you've determined the amount that you expect to receive from Social Security and pensions, as well as your projected expenses, you can estimate the amount of income that you'll need from your own investments.

## Calculate Your Total Nest Egg

Determining the nest egg that you'll need in order to produce your required income is a bit complicated. Using an online calculator simplifies the process. You contribute to your retirement fund until you retire and then start drawing it down at a rate that covers all your expenses, but doesn't deplete the fund too quickly. Multiply your monthly expenses by 12 and then by the number of years you expect to be retired. This gives you the amount that you would need in today's dollars, assuming no inflation and no accumulated interest. An online calculator like the one listed under Resources can give you an estimate that takes these factors into account.

## React to the Market

You have some flexibility in your expenses, so if the market is doing poorly -- before or after retirement -- cancel that trip you and your honey had planned to Bali. This doesn't mean going on a spending spree over your budgeted expenses when the market is going gangbusters; use those gains to buffer against future years that may be leaner. Keep an eye on inflation as well. If your expenses increase faster than your investments because of inflation, you'll need to take a second look at what you spend.