Here's what scares the bejesus out of me when it comes to retirement: There are so many ways to screw it up. Consider, for example, the three phases of any investment plan:

  1. Saving.
  2. Investing.
  3. Withdrawing.

Now consider that something can go horribly awry at every turn. You can:

  1. Save too little.
  2. Invest poorly.
  3. Withdraw too much.

Fortunately, there are some quick rules of thumb that can help you determine exactly what you need to do to achieve your retirement goals.

Know what to save
If you're trying to figure out just how much you need to save now in order to fund your retirement later, just calculate your work-to-retirement ratio -- a metric devised by the American Enterprise Institute's Alex Pollock. To do so, divide the number of years you expect to work by the number of years you expect to be retired and compare your answer to the table below:

W-R Ratio

Required Annual Savings*









*Includes employer contributions to retirement plans.

So, if you're 30 and plan to work until you're 70 and then live until you're 85, your W-R ratio is 40/15, or 2.7. You'll want to save approximately 10% per year in order to avoid a gruesome retirement.

Make money
Now that you've saved, you need that money to grow over time in order to (at a minimum) outpace inflation. We've written extensively about retirement investing strategies on, so rather than rehash it all, I'll boil it down to two points:

  1. You need to own stocks, no matter your age.
  2. Younger investors should own a higher percentage of stocks than older investors.

A convenient way to follow both of these guidelines is to invest in a target retirement fund, such as Vanguard 2040 (VFORX). Designed for those who are currently between 29 and 33, the fund contains hefty exposure to U.S. large caps such as Pfizer (NYSE:PFE), Altria (NYSE:MO), and Citigroup (NYSE:C), alongside smaller allocations to European and Asian large caps such as GlaxoSmithKline (NYSE:GSK) and Toyota Motor (NYSE:TM) and emerging-market stocks such as China Mobile (NYSE:CHL) and Petrobras (NYSE:PBR).

Spend yourself rich
Assuming you've now saved, invested, and amassed a fortune, it's come time to put that money to use. Of course, this part scares me most of all because a mistake here could destroy decades of careful work.

A few years back I wrote about the importance of a 4% withdrawal rate. And while that number continues to be a safe estimate for all retirees, you can bump it up if you know what you're doing. For example, financial planner Jonathan Guyton found that a portfolio of 65% to 80% equities could support initial withdrawal rates of up to 6.2%.

If that sounds high, it is. And it could mean a difference of thousands of dollars per year to your retirement. That said, there are drawbacks. You have to be willing to tolerate volatility and survive on fluctuating levels of income.

The Foolish bottom line
A successful retirement plan is a lifelong process. And while there are many things that can go wrong, our Motley Fool Rule Your Retirement service is designed to help you make sure that everything goes right -- and that nothing takes you by surprise.

You can learn more about saving, investing, and withdrawal strategies by joining Rule Your Retirement free for 30 days. While there is no obligation to subscribe, you may discover that it's just the retirement resource you've been looking for.

Tim Hanson does not own shares of any company mentioned. Pfizer is a Motley Fool Inside Value recommendation. GlaxoSmithKline is an Income Investor pick. The Motley Fool has a disclosure policy.