While there is no clear-cut formula to calculate how much money you will need for your retirement, a recent article in Money breaks down the basics. First, take into account two large changes to your finances after retiring—less income and increased health care costs, and then there are other deductions to incorporate. For example, you'll face lower taxes due to a lower income; you will no longer have to pay Social Security and Medicare tax; you will no longer dedicate 5% to 15% of your income toward your retirement savings; housing costs are typically lower for retirees; and you will probably spend less money on clothes and commuting.

That being said, other factors to weigh into your savings goal depend on when you'll retire or whether you'll work parttime; if you plan on dying broke or leaving an inheritance; the location of your home and how much will be paid off; and the lifestyle you choose (eg, do you plan on traveling, etc). Once you've estimated the annual income you deem necessary for your retirement years, Money suggests calculating your lump-sum savings target. First, subtract Social Security and any pension income from that annual calculation. Multiply by 25. The formula assumes that you will follow standard investing advice and spend only 4% of your investment portfolio the first year, and increase the dollar amount each following year to keep up with inflation. That final number is your estimated retirement savings goal.