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One of the most important steps is to determine how much income you will need once retired. One mistake that many people make is that they do not adjust this amount for inflation. Suppose Justin Dillon estimates that he will need $20,000 per year to live at retirement and he will retire in 25 years. Assuming a 3% inflation rate Justin will actually need $41,876 his first year of retirement to have the purchasing power of $20,000 in today's dollars. Furthermore, assuming inflation continues the annual income of $41,876 will need to increase yearly just to keep pace with the rising costs caused by inflation. In this example Justin would need to save $3300 per year for the next 25 years and receive an average annual rate of return of 12%. The numbers can change dramatically when the average annual return is changed or the years until retirement is changed.
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Many experts agree that Social Security may not
exist in the same form for future retirees. That is why it is more
important now than ever before to plan for retirement. 
