If you search the internet looking for how much cash you need to retire, you'll find estimates ranging from $1 million to $10 million. That's about as helpful as a mechanical pencil with no lead, particularly if your retirement savings are currently well short of seven figures.

A definitive, realistic savings target for retirement is the cornerstone of your long-term savings plan. Without it, you're flying blind. So grab some lead for that pencil and let's figure out what your magic number is.

Woman about to take notes on notepad

Image source: Getty Images.

1. Know the 4% rule

As a first step, you should understand a concept called the 4% rule. Financial experts say that in retirement you can safely withdraw about 4% of your savings each year. If you have $1 million in your retirement plans, you can live off $40,000 annually. At that rate, your risk of running dry is very low. In later years, you can adjust that figure up for inflation.

The 4% rule is not an exact science. It doesn't account for volatility in the market or your unique financial situation. But it is useful to make ballpark estimates. Know that the numbers will be starting points for retirement planning, and will require adjustment as your finances evolve.

2. Look at your lifestyle

Before you pull out your calculator, think about the lifestyle that you want in retirement. There is an early retirement movement called FIRE, or Financial Independence Retire Early. Proponents of FIRE save high percentages of their incomes so they can retire before reaching 50. There is a caveat, though, and it involves lifestyle. Successful FIRE households live very frugally, which allows them to stretch $1 million in savings out for 40 or 50 years.

If that's your retirement outlook, awesome. You might consider moving to a city with a low cost of living, such as El Paso, Texas. According to a Move.org study, monthly living expenses in El Paso are just under $1,200. That means you could get by on less than $20,000 a year in income, assuming you have no debt. Using the 4% rule -- $20,000 divided by 4% -- you can translate that into total retirement savings of $500,000. And if you qualify for Social Security benefits, you'd need to save up even less.

But maybe you don't want to live out your days in El Paso, eating a brown bag lunch and walking around the park for fun. In that case, use your current lifestyle as a benchmark. Add up your living expenses for a year, and then make some adjustments based on your ideal retirement lifestyle. Will you drive less because you're not going to work? Gas expenses go down. Will you travel more? Vacation expenses go up. Don't forget to include income taxes plus any costs currently covered by your employer. Healthcare costs deserve their own discussion, so we'll talk about those below. 

Once you have your annual expense total, divide it by 4% to find your ballpark retirement savings target. If your annual number is $75,000, for example, you'd need roughly $1.875 million to support your lifestyle for 30 years. That assumes no Social Security income.

You can account for Social Security by estimating your annual benefit by making a my Social Security account and subtracting your estimated benefit amount from $75,000. Then divide the result by 4% again to get your savings number. Say your Social Security benefit will be $12,000 annually. Your savings then need to support annual living expenses of $63,000, which brings your target savings goal down to $1.575 million.

3. Plan for healthcare costs

Want to take a guess at what you might spend on healthcare costs in retirement? Here's a hint: It will be way more than what you spend on healthcare today. Fidelity estimated that a 65-year-old couple retiring in 2019 will spend $285,000 on medical costs in retirement. And consulting firm Milliman expects those expenses to be $369,000. 

Before you disregard those figures as ridiculous, consider that a private room in a nursing home sets you back about $8,500 a month. And the cost of a full-time home health aide can be upwards of $4,000 monthly. One health setback can quickly turn into a pretty major financial setback. 

Plan for healthcare costs by adding $250,000 to $350,000 to your target retirement number. 

4. Add up your debts

Debt repayments can skew your retirement planning because they're temporary. When we used the 4% rule above, we assumed the $75,000 in expenses would be necessary for the rest of your life. But that's not the case if $6,000 of that $75,000 is for debt payments. Once you pay off those debts, that expense goes away.

If you do have credit card balances, car payments, or personal loans, pay those off before you're done working. Same goes for the mortgage if you can swing it. Then recalculate your living expenses again, and the picture will look much brighter.

5. Think about your loved ones

Your number crunching may reveal that you can live exactly until age 87. But consider your family and what you'd like to leave for them. At a minimum, plan on covering your own funeral expenses. But you could also think about things like college funds for the grandkids or ongoing care for a relative with special needs.

You could bequeath your home or other property to your loved ones for those purposes. Life insurance might be an option, too, if the costs aren't prohibitive. Or you could simply work an extra few years and save more. If you like the last option, increase your target retirement savings number accordingly.

Saving now is key

Knowing roughly how much savings you need to retire is the first and most important step of retirement planning. Your next move is to ratchet up your savings, which may feel like you're running a marathon. But just keeping putting one foot in front of the other, and you'll be amazed how much distance you can cover.