How much do I need to save?

Walter Updegrave is a senior editor with Money Magazine and is the author of "How to Retire Rich in a Totally Changed World: Why You're Not in Kansas Anymore" (Three Rivers Press 2005)

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NEW YORK (Money) -- Question: I'm 36 and have saved only about $20,000 for retirement. How much per year should I try to save for the next 30 years to assure I'll have a reasonable retirement? --Beth, Grove City, Ohio

Answer: I'd love to be able to give you a quick and simple answer like some people do: Save 10% of your salary each year and you'll be fine!

But while that may be satisfying for you today, you may not be so pleased 30 years from now if you don't have enough savings to support you comfortably in retirement.

Not to worry, though. I'll tell you what you need to know so you can put away enough for a reasonable retirement, but without saving too much and end up living an unnecessarily meager lifestyle during your career.

Before I do that, though, I think it's worthwhile to take a minute to explain what goes into a savings target and why you've got to be careful about accepting glib answers to this question.

There are a number of reasons that the "how much to save" issue doesn't lend itself to easy solutions. One is that you're dealing with such a long time frame -- in your case, 30 years until you retire and then maybe another 30 in retirement -- that accurate forecasting is difficult to say the least.

Another is that the amount you need to save each year depends on so many factors: your income, how you invest your savings, what your investments earn, how much spending money you'll need in retirement and how much assurance you want that you won't outlive your savings, just to name a few. Changing just one of these can make a big difference in how much you need to put away.

Take annual income. Generally, the more you earn during your career, the larger the nest egg you'll need in retirement to maintain something close to your pre-retirement standard of living. So, all else equal, the more you earn, the more you must save.

To get an idea of how much your savings target can rise as your income climbs, I entered your age (36) and the amount you've already saved ($20,000) into our What You Need to Save calculator. Since this tool also asks for your annual pay (which you didn't divulge), I assumed a salary of $30,000. At that level, our calculator estimates that you would need to save 7.2% of your salary each year to be able to retire at age 65 with 80% of your pre-retirement income.

If I assume your annual salary is $60,000, however, the recommended savings rate rises to 14.1% of salary. And if I bump up current annual earnings to $120,000, the target savings rate climbs to 19.3%. (These percentages, by the way, would include any employer-matching funds you might be getting in a 401(k) or similar plan.)

Why, you may ask, should the percentage of salary you need to save increase as your income rises? It's obvious you'll have to set aside more dollars to create a nest egg large enough to maintain a higher living standard. But why should the savings requirement increase on a percentage basis as well?

Two reasons. The first is that our calculator naturally assumes that you'll be getting a portion of your retirement income from Social Security. But Social Security was designed to replace a smaller portion of your pre-retirement income as your salary rises. Which means that the more you earn during your career, the more you'll have to kick in from your own savings to maintain the lifestyle you had during your career.

The other reason relates to the amount you've already saved. The larger your pot of savings, the less new money you'll have to save on an ongoing basis to build the nest egg you'll eventually need. But while $20,000 is a relatively large amount if you're in your 30's and earning $30,000 (two thirds of a year's salary), it's not as impressive if you're earning $60,000 (one third of salary) or $120,000 (one sixth). In short, the more you have tucked away in savings relative to your annual earnings, the lower the percentage of salary you'll need to save going forward.

So given all this, how can you determine how much you should put away each year to give yourself a decent shot at a secure retirement?

You've got a few choices. One is to rev up a calculator that will crunch the numbers and give you an idea of how much you need to save. For a very quick ballpark figure, you can check out the What You Need To Save calculator I mentioned above.

But other tools allow you to plug in much more information -- details about your investments, retirement age, other potential sources of retirement income, etc. -- and thus get a more nuanced estimate of how much you should put away. Tools that I put into this category include our Retirement Planner, T. Rowe Price's Retirement Income Calculator and Fidelity's myPlan Retirement Quick Check. And, of course, you can always consult a financial planner if you don't want to run the numbers yourself.

However you decide to go, don't forget that you're getting an estimate, not an engraved-in-stone guarantee. To be on the safe side, I suggest you to try to save a little more than recommended rate in case your best-laid plans go awry.

Finally, remember that arriving at a savings rate isn't an exercise you do once and then forget about it for the next 30 years. Too many things can change. So check again every year or so to see if you need to make any adjustments.

After all, the last thing you need is to faithfully sock away 10% (or whatever) of your salary only to find in the twilight of your career that you've been saving way too little (or too much) all along.