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Why do I need to save for my retirement? After all, aren’t the government and my company going to provide for my retirement income? And, not only that, but I’ll be making so much more money in the future that I’ll be able to make up for lost time then.

It’s sad that many Americans think that providing for their retirement is somebody else’s responsibility. Savings rates have declined over that past decade and many people are pulling money out of their savings just to make ends meet.

But, that fact is that others are not preparing for your financial future. And, too many people themselves are failing to prepare financially for their own retirement.

The National Retirement Risk Index, prepared by Boston College’s Center for Retirement Research, indicates that 43% of households will fall short of having 90% of the assets they need to maintain their lifestyle into retirement. Generation Xers are worse off with 49% not preparing adequately for retirement.

Government is not the answer. The federal government is feeling the pinch of its overspending habits. President Bush plans for the federal government to spend about $2,885 more per individual taxpayer than it expects to receive in taxes in 2007. About a quarter of your tax money already goes to pay the interest on the national debt. Debt payment is one of the fastest growing parts of the federal budget.

Social Security is not in any better shape. All the excess Social Security taxes now collected are spent by the government. They place IOUs in the form of bonds in the Social Security Trust Fund. The Trust Fund consists pieces of paper with promises to pay future benefits–no real assets. And, the Social Security system is expected to start paying out more in benefits than it receives in taxes by 2017.

Businesses are also feeling the pinch of foreign competition. Large corporations are increasingly hard pressed to meet their promises to pay their retiree’s medical care. Competition with foreign companies that provide few employee benefits have forced some US companies to declare or threaten to declare bankruptcy in order to reduce employee compensation and benefits.

The stool with the three “legs” of retirement security (the government, your company, and you) is starting to wobble. And two of those legs are getting pretty weak. That gives you increased responsibility.

If you retire at age 65, you will probably live for another 30 or 40 years. You must prepare to provide a retirement nest egg that will help supply your financial needs for at least 40 years.

The best way to determine how to have a successful retirement is to use a retirement savings calculator. This will show you the growth in your retirement savings during your working years as well as the value of your savings during the years you withdraw money after retirement.

By adjusting how much you save, the rate of return on your investments, the expected inflation rate during retirement, the amount of pension and Social Security you expect, and other factors, you can determine a plan of action that will sustain you as long as possible.

Here are some of the factors that will affect the amount of retirement savings you accumulate and how long those investments will last.

- Current annual income

- Percentage of your current income you invest for retirement

- Number of years until you retire

- Percentage annual increase you expect in your annual earnings

- Percentage of your final earnings you’ll spend if retired

- Amount of your pension and Social Security you expect to receive

- Inflation rate during your retirement years

- The amount you currently have invested for retirement

- Expected average growth rate of your investments

By entering various values into a retirement savings calculator you can see how to improve your chances for a successful and prosperous life as a retiree.

Let’s look at an example.

Suppose you are 25 years old, starting in a professional job at $50,000 a year with no savings and expect to see increases in your income and inflation of about 4% a year. And you believe you can invest and get a tax free 8% rate of return. You’ll invest for 40 years and need about 60% of your then current income for retirement living expenses. You’ll consistently invest 8% of your income for retirement.

At retirement you expect to receive an annual pension from your company of $35,000 and Social Security of $20,000.

You can expect, at age 65, after 40 years of earning and investing, that your retirement nest egg will be about $1.765,658. That seems pretty good, but your initial annual spending at retirement will be about $144,031. Overall, your investments will provide 29 full years of inflation protected income before they are depleted. At that time you will have to count on only your pension and Social Security, and drastically lower your standard of living.

If you had saved 10% of your income instead of 8%, your retirement nest egg would last 45 years. This small change would allow your investments to carry you through the rest of your life.

You can see how minor adjustments in your retirement preparation can make a significant difference in your future standard of living.

The sooner you start using a retirement savings calculator to adjust your savings plan, the smaller the adjustments you’ll need to make. There is no time like the present to help ensure a prosperous retirement.

Robert Sherman is the owner of Bob Sherman Credit ( http://www.bobshermancredit.com/ ) which provides information about credit, debt, and wealth building. A retirement savings calculator is available to help you plan for a prosperous retirement.