(MONEY Magazine) – While nearly everyone looks forward to retirement as a time of doing exactly as one pleases, there are as many ways to pursue your pleasures as there are people. That's an important retirement planning point, because the stuff of your post-working-life dreams -- be it Caribbean cruises, relocating to the sunbelt or simply working on your golf score -- helps determine how much money you should be putting toward those goals now. The rule of thumb is that you will need an annual retirement income amounting to 70% to 80% of your current earnings. But this range often proves to be too narrow and rigid and can even be downright misleading. ''There are some retirees who live so modestly they can get along on 50% of their former income, and others who spend as much in retirement as they did while working,'' notes Paul Westbrook, a financial adviser in Watchung, N.J. Whatever the life style you envision, the best way to ensure that you can pay for it is to plan as far ahead as possible. The first step is to determine what your annual expenses are likely to be. The worksheet on the facing page will help you do that. Then you can plug this amount into the standard worksheet used by professional financial advisers in retirement planning to estimate how much you must save each year during your working life to have enough money to maintain your standard of living later on. For samples of this worksheet, see page 188 of A Consumer's Guide to Financial Planning by Merle E. Dowd (Watts, $17.95), available at libraries, or page 31 of the spring 1988 Family Wealth, published by MONEY (available for $3.95 from Box 999, Radio City Station, New York, N.Y. 10101). Despite the diversity in retirement living, financial planners surveyed by MONEY note at least some similarities in spending patterns after age 65. For example, most retirees spend about the same amount on food, gifts, charitable contributions and personal care as they did while working. Medical and dental bills, on the other hand, are significantly higher, depending on how generous your company's retirement coverage is. Here are guidelines to help you fill out the worksheet. The column listing the national average in 1986 expenditures of families earning $40,000 or more gives you a rough basis of comparison for your own spending. -- Line 1: If you pay off your mortgage and take care of all necessary maintenance problems before you retire, housing costs should drop by as much as 25% to 30%. Count on even more shrinkage if you sell your house and buy a smaller one. Condominium owners and renters should factor in maintenance-fee and rent increases, however. And anyone who plans to spend more time at home will likely make greater use of lights, telephone and air conditioning and therefore should anticipate corresponding higher utilities charges. -- Line 2: Financial planners estimate that if you are moving from business suits to jeans, you can expect to reduce clothing expenses by 20% to 35%, although socially active people will spend more than other retirees. -- Line 4: Scratch commuting costs. Otherwise, transportation expenses will increase if you intend to be very active. Planners recommend that two-car couples keep both autos during retirement, especially if both are fairly active. -- Line 6: Most people keep giving the same amounts to charitable, political and educational institutions, as well as to family members outside the immediate household. But the overall figure drops, usually by the amount you used to give at the office, such as your annual United Way contributions. -- Line 7: If your kids will be grown by the time you retire, you can eliminate education expenses, unless you plan to help pay your grandchildren's college bills. And if you intend to return to school yourself, check with the institution you will be attending -- many schools reduce tuition costs for senior citizens. -- Line 8: There will be little change in your payout for property, liability and auto insurance, but retirees can generally reduce their life insurance coverage by at least 50% or, if their spouses are fully provided for under their pension plan, eliminate it altogether. -- Line 9: If you are currently covered by a company health plan, expect medical and dental costs to spurt by about 50% because of increased illnesses combined with reduced insurance coverage. Medicare pays only about one-fifth of doctors' fees and less than one-third of hospital bills. Check your company's coverage for retirees. You will probably find you need additional Medigap coverage, which runs an average of $42 a month. -- Line 10: You should plan to be debt-free by the time you retire, thereby eliminating loan repayment expenses. -- Line 12: How much you spend for entertainment depends on how active you are. On average, expect such expenditures to increase by about 20% during your retirement. -- Line 13: Budget for higher veterinary bills if you will have an aging dog, cat or other pet. -- Line 14: While your contributions to pension plans cease at retirement, many financial planners encourage clients to continue setting aside about 10% of their income as a hedge against inflation.

-- Line 15: Unless you have some kind of job, it's farewell at last to Social Security (FICA) taxes. Also, check out the tax laws in your state. Illinois and Pennsylvania, for example, don't tax any income from retirement plans, while other states exclude a portion of it. On the other hand, the conventional wisdom that you will be in a lower tax bracket after retirement is no longer true under tax reform for people earning more than $75,000 annually. Moreover, married couples filing jointly whose total earnings exceed $32,000 ($25,000 for single retirees) could pay tax on up to 50% of their Social Security benefits. -- Line 16: With more and more adult kids expecting financial help from Mom and Dad, and Americans' increasing longevity, you could be contributing to the down payment on a child's first house while paying for a parent's nursing home. Try to make an early and realistic appraisal of any such possibility. Total current expenditures should equal 100% of your current before-tax income. By dividing your total expenditures at retirement by your current gross income, you will arrive at the percentage of your current income that you will need in retirement.

BOX: Expenditures At Current National retirement year average

1 HOUSING $12,674 Rent, mortgage, property taxes, utilities (gas, oil, electricity and water), telephone, home furnishings, household services, maintenance, improvements 2 CLOTHING 2,354 Purchases and cleaning 3 FOOD 6,242 (including tobacco and alcohol) 4 TRANSPORTATION 9,331 Car repair and maintenance, installment payments, gas, commuting costs, other 5 GIFTS N.A. 6 CONTRIBUTIONS 1,785 7 EDUCATION 676 8 INSURANCE 571 Life, medical, auto, property, liability 9 MEDICAL AND DENTAL CARE 1,471 Premiums, deductible and out-of-pocket costs 10 LOAN-REPAYMENT COSTS N.A. 11 PERSONAL CARE 360 Grooming, health club, other 12 ENTERTAINMENT 2,282 Vacations, dining out, movies, plays, concerts, sports events, cable TV, videocassettes, entertaining, sports, hobbies, other 13 PET EXPENSES N.A. 14 SAVINGS AND RETIREMENT 5,405 Contribution to company plans, IRAs, Keoghs, SEPs, other savings, investments 15 TAXES 6,660 Federal, FICA, state, local 16 SUPPORT OF RELATIVES N.A. TOTAL EXPENDITURES (add lines 1 through 16) 49,811

TOTAL CURRENT EXPENDITURES DIVIDED 100% BY CURRENT GROSS INCOME

TOTAL EXPENDITURES AT RETIREMENT DIVIDED BY CURRENT GROSS INCOME