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Given all of the above, you're now ready to use the Foolish calculator to its greatest advantage! Instead of just using a flat income level throughout all years of retirement, you may now show a rate of spending that is far more typical of actual retirees, that is, provided you have completed your financial statements.

If you're like most people (and who isn't?), early retirement shows a higher level of spending simply because you are now free to do all of those wonderful things you've always wanted to do. It's as if you've been freed from that wage girdle that's been suffocating you all these years. Go ahead! Breathe! Let yourself go!

Then, in middle retirement, things may slow down. After all, once you've seen the Leaning Tower of Pisa or the Beefeaters of London, how often will you go back? If you've seen one Beefeater, you've seen 'em all.

Finally, in later retirement, expenses may increase again due to housing desires or because of medical or physical problems. Using a Cash Flow Statement helps you think through these issues, however painful to contemplate they may be. Using a flat income estimate does not. And that's how we figure out what your retirement will really cost.

And that concludes today's lesson. Next, Roy Lewis (TMF Taxes) takes the wheel and shows us how to handle Uncle Sam and avoid the havoc he may wreak on your retirement plan.

But wait! Don't put down that mouse just yet! We've got some homework to do.