Especially today, when college is expensive, jobs aren’t that easy to come by and most Americans are worrying about keeping their head above water, the last thing most young people are worrying about is saving for retirement.

The Scary Truth About Generation Y and Retirement

Generation Y is a general term used to define the group of people in society under 30, who are just entering the workforce and starting to pave their way towards a career.

Every generation has a different view on work, life and the world. This view is often largely molded by the environment and society.

According to CNBC, more than 50% of those in Generation Y have not started to save for their retirement. It seems that while this generation does know the importance of saving money and is very aware of the state of the economy, this fact has not changed the general view on saving for retirement. Many young adults are of the opinion that they can start saving later in life so they won’t worry about it now.

We live in an age of immediate gratification. The immediacy of everything from music to cash has created a generation that lives for now, rather than prepares for later. While this philosophy on life is one view, it can be dangerous when it comes to planning and saving, specifically for retirement.

Retiring at age 65 is no longer possible for many people. Many retirement-aged Americans who imagined traveling or relaxing on the porch in their golden years find it necessary to continue to work to make ends meet. Even those that have planned for the later years are finding it difficult to live on retirement savings alone.

Wake Up Gen Y

It is never too early to start saving for retirement. It is possible to have a “live for now” philosophy on life, while still looking into the future and creating a little bit of a cushion, just in case things get hard. Retirement savings is that cushion for the future.

The hard truth is that the twenty-somethings are the ones who have the bleakest future in terms of Social Security running out. Many find themselves working without benefits, or job security if they are even lucky enough to find a job making enough to pay the bills, which makes it even more important to plan for the future.

Taking one step, however small, towards securing the future can make all of the difference later.

Saving for Retirement: Simple Ideas to Get Started

The Employer Match: Many employers offer some form of retirement plan that provides a percentage match. Those that are lucky enough to have a full time job with benefits should take advantage of the employer retirement match. This is a simple painless way to add dollars to your retirement savings.

Pretend You Never Got It: If you are lucky enough to be eligible for a raise or a bonus, or made a few extra overtime bucks, just pretend it never existed. After all, you have been living without it up to now. Putting your “extra” into savings or investing it in a Roth IRA or bond is a great way to save money for retirement, even if you don’t have a traditional retirement plan.

What a Great Gift: Instead of asking Mom or Dad for a new leather jacket or gift card for Christmas or your birthday, why not ask if they would invest in a stock or an IRA instead? This is a great way to start growing your money without tax burden and an excellent investment towards your future.

Not negotiating better pay during the hiring process. In this economy, it’s easy to be grateful for even having a job. But you are definitely short changing yourself if you don’t negotiate for higher pay once an employer presents a job offer. A higher starting salary sets you up for bigger paychecks down the line because most raises are calculated as a percentage of your current pay. The worst an employer can say is no. And unless you are very rude in your negotiations, it’s highly unlikely that an employer will take their original offer back because you asked if there is any room for improvement.

Working less than 35 years. You could be drastically cutting your Social Security checks without even knowing it if you decide to retire early. Your Social Security checks will be based on your 35 highest annual salaries. If you work less than 35 years, you get a zero averaged in for each year that you didn’t work. And it’s usually a good idea to work even more than 35 years to cancel out unfortunate years that you didn’t work much due to layoffs or your lower salary at the beginning of your career.

Letting lifestyle inflation creep in. It’s easy to spend a little more each time your income increases. Spending more money improves your quality of life, allows you to celebrate your achievements, and also helps to keep you motivated. Although money isn’t just for hoarding, it’s important to also save for the future as your paychecks grow.

Withdrawing more money when investments perform well. If your retirement plan includes owning volatile investments like stocks, you should know that the performance of those investments can vary widely from year to year. Let’s say you had $500,000 invested in 2009 and started your 4 percent withdrawal at $20,000 a year. When 2011 rolled around, you probably had more than $500,000 of liquid assets available even though you withdrew money for two years.

Seeing that you now have more money, some people might start to inflate their withdrawals and take 4 percent of the new total. If your account balance grew to $700,000, a 4 percent withdrawal is $28,000 instead of $20,000. But what if the stock portion of your portfolio later loses 20 percent? Those who stay with their original $20,000 withdrawal probably won’t run out of money because the down years were already accounted for. People who take out more money in years when their investments perform well increase their risk of running out of money because that level of investment growth is unlikely to continue forever.

Thinking there is always tomorrow. If you consistently put off saving until future years you will not have enough saved to retire well. For most people, retiring comfortably takes years of diligent savings. The earlier you start saving, the more time your money has to accumulate interest and growth.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future.

Answer: Ah, the number. Books have been written about it. ING has designed an entire ad campaign around it. And an assortment of online calculators will help you figure out yours — that is, the savings you’ll need to amass by the end of your career to generate enough income beyond Social Security and pensions to retire comfortably.

But while the obsession with this figure is somewhat useful — it is good, after all, to have a goal — there are better ways to determine if you’re making progress toward a secure retirement.

To arrive at the number, you estimate how much income you’ll need to maintain your standard of living after you retire — and how long that income must last. So the number for a 55-year-old who earns $150,000 a year, plans to retire at 65 on 80% of his salary, and wants that income to last until age 95 would be $3,136,687, according to ingyournumber.com.

A moving target

But for all the apparent precision, your number is really an estimate — and a squishy one at that. Your actual target could be much lower if you pay off your mortgage before retiring and your expenses drop significantly. Or it could be higher if you plan to travel a lot in retirement or if you run up steep health care costs. Other factors that will skew your bogey: your investment gains, how long you live, when you retire, and whether you work part-time after retiring.

The further you are from retiring, the more unknowables you face and the bigger the grain of salt you must factor into any estimate. So while it’s useful to monitor your progress, your main concern, especially early in your career, should really be saving all you can. As you get older, and as some variables come into sharper focus — like your health, your intended retirement age, and your projected peak salary — then it may become easier to settle on a realistic numerical goal.

A better alternative

But your question raises a larger issue: Does it make sense to shoot for a big lump sum? A huge six- or seven-digit target can be intimidating. Besides, many people have a hard time wrapping their minds around big numbers. Behavioral economists warn of “wealth illusion,” or the tendency for people to overestimate the sustainable income a large pile of money can generate.

That’s why many retirement experts believe, as I do, that you’re better off focusing on how much income you’ll need — and whether you’re on track to get it. Yes, that’s an estimate too, but one you can more easily equate with a lifestyle.

Some 401(k) plans are already helping workers make this shift. Putnam has introduced a Lifetime Income Analysis Tool that allows participants to see how much annual income they’re projected to get from their current 401(k) balances, future contributions, company matches, and Social Security — and how tweaking their contribution rate, retirement age, and stock/bond mix could get them closer to their goal.

Apparently, though, when women make the momentous move from self-help to seeking professional advice about investing and retirement, things go rapidly downhill. A recent study by the Boston Consulting Group revealed that women perceived themselves as receiving wealth management services at a level of quality that is inferior to that received by their male counterparts.

According to the study, women are the key decision-makers when it comes to 27% of the wealth worldwide: that’s $20 trillion! But despite the massive chunk of power they wield, 55% of the women surveyed in the study said they felt their wealth manager could do a better job of advising them. Almost a quarter of the respondents said private banks needed “significant improvement” in the services they offer to women.

“The dissatisfaction stems from the unshakable perception that men get more attention, better advice, and sometimes even better terms and deals,” according to study co-author Peter Damisch. “We heard this sense of subordination time and time again in our interviews.”

This perceived disparity in service arose from several key disconnects in the relationships and communications between women and their financial advisers. Manisha Thakor, Chartered Financial Analyst and women’s financial literacy advocate, offers some steps savvy female investors can take to avoid being under-served by their wealth managers and investment advisers:

1. Find your adviser and get your financial education from women-run resources.

The financial services industry is dominated by males and therefore the “DNA is structured around the male experience,” Thakor explains, adding that she sees many firms making an effort to change this. Most financial advisers are men, who may not inherently understand the whole-life nature of the average woman’s financial plans and needs. They also may have very different communication styles than their women clients.

Thakor recommends women use women-created resources like LearnVest and DailyWorth to educate themselves in order to avoid the intimidation factor when talking about investment products with their advisers. She also encourages women to consult Garrett Planning Network, founded by Certified Financial Planner Sheryl Garrett, to locate a local certified financial planner who works on an hourly-fee-only basis. Taking these steps, Thakor explains, may alleviate the concern expressed by many women in the BCG study that they were not being taken seriously or talked to on the same level as male clients by their financial advisers.

2. Expressly state your ideal career trajectory, then ask how you should alter your investment plans accordingly.

In the BCG study, women stated that their investment advisers fundamentally misunderstood what was actually important to them, and recommended a too-narrow range of inappropriate investment vehicles as a result. Many said their advisers assumed they had a lower risk tolerance than they actually did, or that their advisers focused on short-term results and disregarded their long-term goals, which often included time out to care for a child or parent.

Thakor offers women a script of sorts to remedy this communication disconnect. “Go in and say: “I want to be a mom and I may take X amount of time out of the work force,” she advises. Then ask, “How do we adjust how much I need to save and how I should invest to compensate for this?”

Hollywood

One word: Hollywood.

Since TV and movies became a popular source of entertainment, we’ve been fed idea after idea of what our retirement years should look like. We began anticipating our golden years as hassle-free and cash-laden. But it’s rare that spoon-fed morals and focus group decisions are truly representative of real life. Exposing these Hollywood clichés will hopefully bring the reality back to retirement.

Cliché #1: You’ll Live On A Beach-Front Property (As seen in “Office Space”)
Mojitos on a sunny beach-front property with a deck overlooking the ocean, as a reward for years of blood and sweat - this is how retirees are often represented on film. And the worries of civilian life are long left behind. The only real concerns are which pair of white beach pants to wear, and ensuring that the blender is still working.

But the reality is that, with the housing and lending markets in current disarray, we’ll be hard-pressed to keep our own homes – never mind those on facing the Pacific sunsets.

In actuality, soon-to-be retirees are clamoring to hold on to their current properties or – more commonly – considering downsizing, in the hopes of using any profit made from a house sale as expendable income.

Rural and isolated areas may become harder to come by, as condominiums and shared accommodations become the norm for retirees. Oh, you can still have that mojito – but there’s a greater chance that you’ll be sipping it on your 17th-story balcony watching the police direct traffic below.

Cliché #2: The Gold Watch (As Seen In “About Schmidt”)
We all want to be appreciated. And after 20, 30 or even 40 years with a company, it’s fair to expect some recognition – a dinner, an office party or even the overused cliché of the gold watch. We’d all like some form of appreciation for years of honesty and dedication.

But the reality of the matter is that the length of careers is becoming shorter and shorter by the year. Even Baby Boomers aren’t lasting in their workplaces as long as their parents or older siblings did – a 2008 survey by the Bureau of Labor Statistics revealed that those born in the later years of the baby boom averaged about 11 jobs between the ages of 18-42, while the older generations averaged five or less. And with shorter career life spans comes less incentive for large-scale recognition.

While we won’t have statistics on the current generation’s professional life for quite some time, if the labor markets continue down this road you’ll be lucky to get a handshake when you hit 65. (Even if the economy is unstable, don’t worry.

Cliché #3: Shot Three Days Before Retirement (As Seen in Any ’80s Action Movie)
For some, this may seem like a great escape – for others, the ultimate cop-out. But the cliché of not having to face retirement at all is becoming less and less likely. The truth is the length of life expectancy has been growing consistently for generations.

In the U.S. in 2010, the average life expectancy is currently 78.2 years – 75.6 for men, and 80.8 for women. That’s almost 10 years longer than just 50 years ago, and almost 15 years longer than the age most people expect to retire (65). And let’s not even consider colonial times, when life expectancy was reportedly only 45 years. Try building your Roth IRA for that one.

So, even when you throw yourself a retirement party with the three friends you have left, in your one-bedroom condo, it might be a good idea to keep the want ads nearby – you never know when you’ll need a little part-time supplementary income.

The Bottom Line
While the concept of a traditional retirement – or even a glamorous one – is not dead, it does take a more aggressive approach on your part. As has been said many times, the key to a strong retirement nest egg is to start saving early and be unforgiving in your dedication to making that pot grow!

In December 1984, Kim, Larry and I were on a skiing holiday. At night we would discuss our plans for the future. Kim and I were on our last few dollars and Larry was in the process of building another business. On New Years Day, we tried to set some goals. Larry wanted to do more than just set goals for the coming year, he wanted us to set goals that changed our lives.

“Why don’t we write a plan on how we can all become financially free?” he urged.

I had talked about it and dreamt about it. But the idea of being financially free was always in the future, not today.

“Let’s write it down,” Larry said. “Once we write it down, we have to do it, and we’ll support each other on the journey.”

Kim and I looked at each other doubtfully. “It’s a good idea but I think I would rather just focus on surviving for the next year.”

“Come on,” said Larry. “Let’s go for freedom. I don’t want to spend my life working just to pay bills. I want to live. I want to be rich. I want to travel the world while I’m young enough to enjoy it.”

I recalled the words of my rich dad: “The biggest challenge you have is your own self-doubt and your laziness. It is your self-doubt and your laziness that define and limit who you are. It is your self-doubt and laziness that deny you the life you want.”

It was time to choose. “OK, let’s set the goal to be financially free.” That was New Year’s Day 1985. In 1994 Kim and I were free. Larry went on to build his company, which became one of Inc. Magazine’s fastest growing companies of the year in 1996. Larry retired in 1998 at the age of 46 after selling his company.

How did we do it?

It’s not about how we did it. It’s about why we did it. From 1985 to 1994, Kim, Larry, and I focused on rich dad’s three paths to great wealth:

Increasing business skills
Increasing money management skills
Increasing investment skills

The why is because I wanted to challenge my own self-doubts, my laziness and my past. It was the why that gave us the power to do the how.

My arguments against Larry’s idea were things like: “But we don’t have any money”; “I can’t do that”; “I’ll think about it next year, or once Kim and I get settled”.

Rich dad had told me: “Whenever someone says something like ‘I can’t afford it’, or ‘I can’t do it’ to something they want, they have a big problem. Why in the world would someone say ‘I can’t afford it’ or ‘I can’t do it’ to something they want? Why would someone deny themselves the things they want? It makes no logical sense.”

My own whys
I was fed up with being broke and always struggling for money.
I was tired of being average.
My parents had struggled under a mountain of bills.

Most painful of all, my beautiful wife Kim was in this financial mess because she loved me.

Things got worse for us before they got better. Kim and I lived in a car for about three weeks after our money ran out. So things did not get better just because we made the decision to retire rich, but it was the reasons why that kept us going.

Rich dad used to say: “If you want something, be passionate. Passion gives energy to your life.” Passion is a combination of love and hate. “If you want something you do not have, find out why you love what you want and why you hate not having what you want. When you combine those two thoughts, you will find the energy to go get anything you want.”

For example, I would create the following list:

LOVE
Being rich
Being free
Buying anything I want
Expensive things
Having other people do what I don’t want to do

HATE
Being poor
Being required to work
Not having what I want
Cheap things
Doing things I don’t want to do

So sit quietly to find and define your loves and hates. Then write down your whys. Write down your dreams, goals and plans on becoming financially free, retiring early and retiring as young as possible. Once it is in writing, you may want to show it to a friend who will support you in achieving your dreams. Take a look at this paper with your dreams, goals and plans on a regular basis. Talk about it often, ask for support, be willing to continually learn, and before you know it, things will begin to happen.

I have heard many people say: “Money doesn’t buy happiness.” That statement has some truth to it. But what money does do is buy me the time to do what I love and pay other people to do what I hate doing.

Here are a few ways couples can boost their Social Security benefits:

Utilize Spousal Payments

Spouses are entitled to a Social Security payout of up to 50 percent of the higher earner’s check if that amount is higher than benefits based on his or her own working record. Retired couples in which one spouse did not work or had low earnings have the most to gain from this provision. However, low-earning spouses must wait until what the Social Security Administration calls the “full retirement age” to collect the full 50 percent. (For baby boomers born between 1943 and 1954, the full retirement age is 66.)

Benefits are reduced for spouses who collect before their full retirement age. For example, a low-earning spouse whose full retirement age is 66 would only be eligible for 35 percent of the higher earner’s benefit at age 62. The spousal benefit does not increase above 50 percent of the higher earner’s benefit if claiming is delayed beyond the full retirement age.

Claim and Suspend

The lower earner cannot receive spouse’s benefits until the higher earner files for retirement benefits. Workers who have reached their full retirement age may apply for retirement benefits and then request to have the payment suspended. Claiming and suspending payments allows the lower earner to claim a spousal benefit and the higher earner to continue working and earn delayed retirement credits until age 70.

“This would tend to maximize their lifetime benefits and more importantly maximizes the survivor’s benefit,” says Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner of the Social Security Administration.

“You will ensure you will have a higher benefit when you need one, which is when you are a widow later in life.” Social Security checks increase by 7 to 8 percent for each year of delayed claiming between your full retirement age and age 70. After age 70 there is no additional benefit for waiting to collect your due.

Claim Twice

Duel-earner couples who have reached their full retirement age can claim Social Security twice: first as a spouse and later using their own work record. A person may choose to sign up for only a spouse’s benefits at their full retirement age and continue accruing delayed retirement credits on their own Social Security record.

The worker may then file for benefits based on their own work at a later date and receive a higher monthly benefit due to delayed retirement credits. For example, a man planning to retire at age 70 could claim a spouse’s benefit based on his wife’s earnings at age 66 and then claim again based on his own working record when he exits the workforce at age 70. High-income couples with relatively equal earnings gain the most using this strategy, according to calculations by the Center for Retirement Research at Boston College.

Include Family

Social Security recipients who have children under age 16 or who are disabled can secure additional Social Security payments for the child and a spouse caring for the child, even if the spouse is under age 62. Each child is eligible for up to 50 percent of the retiree’s full benefit.

However, payments to family members are capped, typically at 150 to 180 percent of the retiree’s benefit payment. If the total benefits due to the retiree’s spouse and children are above this limit, their benefits will be reduced. The retiree’s payout, however, will not be affected.

Ex-Spouses are Eligible

A former spouse may be eligible for benefits if the marriage lasted at least 10 years. The divorced spouse must be age 62 or older and unmarried. The amount of benefits an ex-spouse claims has no effect on the benefits the worker and her or her current spouse can receive.

Boost the Survivor’s Benefit

Widows and widowers are entitled to the higher earner’s full retirement benefit. Surviving spouses can begin receiving Social Security benefits at age 60, or age 50 if they are disabled. Benefits are reduced by up to 28.5 percent if claimed before the recipient’s full retirement age. The surviving member of a dual earner couple can also claim a reduced benefit on one working record and then switch to the other.

For example, a woman could take a reduced widow’s benefit at age 60 and then claim 100 percent of the retirement benefits based on her own working record when she reaches her full retirement age. Most survivor benefits are paid to women because wives are generally younger than their husbands and live longer.

A husband can increase the monthly survivor’s benefit his wife will receive by 60 percent by waiting to sign up for Social Security until age 70.

To the best-selling author of Rich Dad, Poor Dad, the worst thing you can do with your money is to stash it away in a 401(k).

“The worst advice most people take is that they go to school, they get a job and then they get a 401(k),” said Kiyosaki.

Take that, conventional wisdom!

For Kiyosaki and his team, the financial boogeyman is income taxes.

“Taxes are going up, and taxes are your single largest expense throughout your life,” Kiyosaki said.

And the 401(k) is one of the biggest offenders, said Tom Wheelwright, Kiyosaki’s tax specialist.

“All a 401(k) does is defer or postpone your taxes to a later date,” he said. “A 401(k) really presumes that when you retire, you’re going to be poor. It presumes that you’re going to be in a lower tax bracket than you are today.”

In fact, Wheelwright said, most people who want to retire with the same lifestyle they’re living today actually need more money, not less.

“They’ll pay higher taxes, not less,” he said. “They won’t have their children as an exemption, they may not have their home mortgage interest deduction, so they’re actually in a higher tax bracket.”

Dallas certified financial planner Michael Reppert understands Kiyosaki’s perspective, especially his argument that taxes are headed higher because of the health care overhaul and its effect on government spending.

“He’s got a very good point about where we’re headed now with the entitlement programs and our government debt,” said Reppert, of Spectrum Advisors in Addison.

He also said Kiyosaki’s argument “has some merit in that the 401(k) should not be the only vehicle you’re using for retirement.”

Instead of having all their savings in taxable accounts, such as traditional IRAs and 401(k)s, Reppert said, consumers should have another source to draw from, such as a Roth IRA.

If tax rates are going up, you want to have the ability draw from a tax-free bucket to offset those increases in taxes, he said.

“If you need $50,000 a year, you could draw a portion of what you need from the taxable and the other portion from the tax-free so that you can actually lower your overall tax,” Reppert said.

I understand Reppert’s logic, but it presumes that you have enough money to spread among different accounts and other investments.

For many, the challenge is more primal. They’ve got to start saving for retirement at some point, and for most workers, the 401(k) is the best place to start. That’s where I differ from Kiyosaki.

“What we do know about the majority of people is that they have very little money,” said Dallas Salisbury, chief executive of the Employee Benefit Research Institute, a nonprofit, nonpartisan organization that studies employee benefits issues. “The 401(k) is the first time they’ve ever engaged in systematic savings.”

And that’s where you want them to stay.

It may be the biggest financial question in your life. With 80 million baby boomers now heading into the flight path for retirement, it’s a pressing one, too.

Yet a horrifying number of people have never even asked it — and may not know how to find answers.

Earlier this month, a survey from the Employee Benefit Research Institute, a leading nonprofit in the retirement field, found that fewer than half of workers, 46%, had tried to calculate how much they would need for a comfortable retirement.

That is even scarier than the data showing that most people haven’t saved enough. (And the two, of course, are closely related. One of the biggest reasons people haven’t saved enough for retirement is that they don’t realize how much they will need.)

So how do you go about working out the answer? There’s a simple five-step approach.

1 Find the target.

Start by estimating your “target retirement income.” That’s simply the annual income you think you will need to live comfortably in retirement. Some experts advise drawing up budgets.

But if you are looking for a ballpark figure, there is a simpler approach. You can just assume that the discretionary income you are likely to need in retirement is about the same as the one you have now. It’s not perfect, but it’s a good place to start.

So take your current gross income, and deduct the costs you no longer expect to have once you are retired. That includes your payroll taxes. It includes the amount you’re saving. It may include temporary expenses, such as college costs for your children. And if you are currently paying a mortgage, and expect to have it paid off by the time you retire, it includes the mortgage costs, too.

What is left after these costs is your discretionary income. If you want to know what you will need in retirement in order to live comfortably, that’s as good a guess as any.

2 Estimate Social Security.

Work out how much you are likely to get each year in retirement from Social Security.

The Social Security Administration has online calculators to help. You can find them at www.socialsecurity.gov/planners/calculators.htm and www.socialsecurity.gov/estimator. Be aware that delaying your retirement date, up to the age of 70, will earn you higher Social Security payments. Remember to count your spouse’s likely benefits, too.

3 Subtract pensions and other income.

Don’t forget any income you are likely to get from other sources, such as a traditional company pension.

These used to be the bedrock of retirement planning, but fewer and fewer workers are covered by them now. Companies have shifted toward 401(k) plans, where the investment risk is borne by the employees rather than the employer.

Even those who are still covered by traditional pension plans typically rely on them less. These plans reserve their biggest benefits for those who stay with the same company for their entire career, and who does that anymore?

If you are still covered by a traditional pension plan, you should contact the administrators to find out how much you are likely to get when you retire.

4 Subtract income from your target.

With these three pieces of information in hand, you can now work out how much retirement income you will have to provide from your own savings. The answer, simply enough, is your target retirement income (step one) minus the income you can expect from Social Security (step two) and any traditional pension (step three).

5 Multiply the result by 20.

And from this you can estimate the savings you will need to accumulate in order to generate that income each year. It’s about 20 times as much as the annual income.

In other words, if you are going to need to generate about $10,000 a year in retirement income out of your own resources, you will probably need to save about $200,000 by the time you retire. If you want to generate about $50,000 a year, you will probably need to save $1 million, or 20 times that.

Why 20 times? It’s simple math. You don’t want to run out of money, so to be safe you should really save enough to last for several decades. Many of those turning 65 in decent health these days should plan on lasting into their 90s. And when you are retired, you should probably plan on the basis that your investments may only earn 3% a year above inflation, maybe even less.

Investors may earn more, but those in retirement are probably going to want to play it reasonably safe. Based on those assumptions — they are, I admit, conservative — you will need to save about 20 times the annual income you need your savings to generate. Those who want to be even more secure could save 25 times.

For many people, this savings target will work out at around eight times current gross income. That’s because the target retirement income is often about 80% of current income, Social Security aims to replace maybe 40%, and 20 times the difference is eight times. (If you’ve paid off a mortgage, you will need less).

Some people will tell you this figure is too high. They’ll tell you a 65-year-old today can buy a lifetime annuity of $10,000 a year for about $130,000, or 13 times as much. But this is a dangerous illusion. It ignores inflation.

Over a decade or two, even mild inflation will seriously erode the real value of a fixed income. If inflation were to jump — a significant possibility — the risk is even bigger. The numbers here are based on real, post-inflation calculations.

Write to Brett Arends at brett.arends@wsj.com

First, in January, the Obama administration said it wanted to promote the availability of annuities in 401(k)s and similar plans. Only 22% of such plans now offer them.

This initiative isn’t as detailed as some annuity ideas that have been floated. But as long as annuities are not mandatory — or laden with onerous fees — I favor the notion of making them an option since they would allow more workers to turn some of their nest egg into guaranteed income for life.

The second idea is a Senate bill that would require your 401(k) to inform you of the projected monthly income you could expect at retirement based on current savings.

I agree with the concept: We should encourage people to focus on the income their 401(k)s might generate, rather than their balances. But it seems to me you’re better off knowing how much income to expect if you keep saving until you retire. That’s the approach Social Security takes with its annual statements.

How long it will take for these initiatives to get through the legislative and regulatory process is anyone’s guess, but in the meantime you can put the concepts into practice in your own planning.

If you’re near retirement, see how much income your savings would yield through an inflation-adjusted immediate annuity. You can find a calculator that will provide such a figure by Googling “Vanguard Lifetime Income Program.” Then combine that figure with your Social Security benefit, which you can get from the Retirement Estimator at ssa.gov.

If you think you’ll have trouble living comfortably on the sum of these two figures, you may want to think about postponing retirement.

If you’re years from retiring, see if you’re on the right path. Many 401(k)s offer tools that project income given how much you’ve saved, how much you’re contributing, and how much longer you plan to work.

In either case, you’ll get a decent sense of how much income you can expect. And when it comes to gauging your preparedness, the feds have it right: Income’s the thing.