NEW YORK (CNN/Money) - Americans spend a lot of time fantasizing about all the fun they'll have when they retire. But the daydreams almost never include the ugly reality: just how much those extended vacations are going to cost.

According to a survey by the American Savings Education Council (ASEC), more than half of all workers anticipate they'll need less than 70 percent of their pre-retirement income during their golden years – an estimate that's unrealistic for even the most disciplined budgeters.

"People often wrongly assume that their expenses are going to come down when they retire, but in fact they often go up," said Don Blandin, ASEC's president. "Depending on how long you live, the kinds of medical problems you have and the kind of lifestyle you want, you may need 120 percent of your current income during retirement."

One the first mistakes people make when it comes to retirement planning, or lack of it, is not coming up with a good estimate for how much they need to have in the bank before they can quit work for good.

"Rather than just saving blindly, you need to have a realistic end goal in mind," said Blandin, noting that only one third of Americans say they have calculated what they'll need to retire.

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To get to that end goal you need to first get a grip on how much you'll be spending each year of your retirement. The minimum amount most often quoted by financial planners is 70 percent of what you earned each year during your peak earning years. But that percentage, says Blandin, assumes that you've paid off most big-ticket expenses, including your home.

In fact, the majority of current retirees surveyed by ASEC say they are spending at least 80 percent of what they made during their working days, and experts say that percentage is likely to only get larger as medical costs climb.

"For most people who retire at age 65, their spending will stay the same because what they spent on suits and mortgage payments they're now spending on golf clubs and travel," said Tom Grzymala, president of Alexandria Financial Associates. "Their spending might drop a little as they get older but then medical bills will probably bring it back up again."

In 2000, Americans age 65 and older spent an average of $3,247 on healthcare, representing about 12 percent of their total out-of-pocket expenses, according to the U.S. Bureau of Labor Statistics.

That share is expected only to increase as healthcare costs rise faster than benefits. Right now, 33 percent of retirees depend on their former employers to supplement their Medicare coverage. But among large employers with healthcare benefits for retirees, 22 percent say they are likely to stop offering such coverage within the next three years, according to a survey by the Kaiser Family Foundation and Hewitt Associates. Meanwhile, the majority of employers plan to raise retirees' premiums and prescription drug co-payments over the next three years.

"With more companies not providing healthcare those employees are going to have to figure out how to pay for healthcare," said Blandin, who recommends that anyone who needs a reality check on healthcare costs need only look at the full price of their prescription drugs. "The increase in health care and a longer life expectancy is what could easily eat away at whatever source of income you have in retirement."

While a long life is a blessing, it can throw a loop in your retirement plans if you live longer than you've accounted for in your savings. A healthy woman in her 30s, can expect to live into her 90s, according to Northwestern Mutual's Longevity Game. Unless she stays in good health, she may be living some of these years in a long-term care facility.

"In my state the price of a long-term care facility is now $42,000 to $46,000 a year and is expected to be around $100,000 in 10 years," said George Heppner, a certified financial planner in Bend, Oregon. "No one is prepared to deal with that kind of cost unless they buy long-term care insurance when they're young and it's still affordable."

A million dollars certainly seems like a lot of money. But someone who now earns $70,000, hopes to retire in 25 years at age 65 and live until age 90 on 80 percent of his pre-retirement income, will actually need to save $1.3 million to carry him through.

That estimate even assumes that Social Security kicks in an extra $19,000 a year during retirement. But planners warn that the program is likely to undergo some big changes between now and when most people retire. In fact, Alan Greenspan recently said that Social Security will suffer abrupt and painful changes down the road if it doesn't get a makeover soon.

"Even some of us boomers aren't counting much on Social Security," said Blandin. "If anything it should be a little icing on the cake."

For most people, the primary source of income in retirement will be what they've saved in their employers' 401(k), 403(b) or 457 plans. But while the majority of large employers offer such plans, only 67 percent of workers say they have saved anything for retirement, according to ASEC.

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Those who are saving in their employers' plans are contributing, on average, just 6.5 percent of their pre-tax income, according to Hewitt Associates. Unless you make about $185,000 a year, you'll need to save more than that before you run up against the current $12,000 contribution limit. (The limit is rising by $1,000 every year to $15,000 in 2006, and people over 50 may be able to "catch up" with even higher contributions.)

If you're hesitant to raise your contribution for fear it will eat up too much of your take-home pay, raise your savings slowly. Most plans allow you to log on to their site and change your contribution rate as you see fit.

You may not even notice the additional one or two or three percent coming out of your check. But that extra amount will go a long way toward securing your golden years.