First the bad news: The conventional retirement system is rapidly falling apart. Social Security doesn't expect to be able to make all its expected payments starting in 2041. Many of the companies that still have pension plans are either cutting them back or eliminating them entirely.

The trend is clear. Nobody else will take care of your financial future. With the social safety net failing, and guaranteed pensions falling by the wayside, if you ever want to retire, you need to take matters into your own hands. So if you want your golden years to be comfortable, you'd better get started. Now.

Your keys for success
A successful retirement is still possible, if you're willing to make the most of three very important tools:

  • Money
  • Time
  • A strong plan

The first of those should be pretty obvious -- of course you'll need money to retire. Just because you plan to stop working doesn't mean you plan to stop spending. You'll still have to eat, and you may just want to travel the world, spoil your grandkids, or do any number of other wonderful things with your newfound freedom. And all those wonderful things require cash.

So you'll need a target. Let's pick $1,000,000 as a starting point for a goal -- you can adjust it from there to match your own idea of a successful retirement and your own projections for inflation.

Time's a wasting
Of course, if you already had that kind of money, you wouldn't still be reading this. That's where the second tool -- time -- comes in handy. This table shows how much you'll need to sock away every month to reach that $1,000,000 target:


8% Annual

9% Annual

10% Annual

11% Annual














































As you can see, the earlier you get started, the easier and cheaper it is to reach your goal.

Get there from here
As for those 8% to 11% potential returns, those numbers weren't just picked out of a hat. Historically, the S&P 500 has earned investors an average annual return of somewhere around 10% to 11%. Even assuming that average return, not all the stocks within it move in unison. For instance, while the index itself has gained about 15% in the past year, check out the performance of some of the individual constituents within that index:


One-Year Gain (Loss)

Countrywide Financial (NYSE:CFC)


DR Horton (NYSE:DHI)


Archer-Daniels-Midland (NYSE:ADM)




H&R Block (NYSE:HRB)


Tiffany (NYSE:TIF)




On one end, the mortgage meltdown is hampering lenders like Countrywide and homebuilders like DR Horton. On the other end, the strong luxury goods market is helping move jewels from Tiffany's and iPhones from Apple. Mix them up with 493 other companies, and you get the performance of the index on average.

The problem with investing only in stocks, though, is that sometimes, even a broad stock index can fall. To temper that risk, many investors further diversify their holdings into bonds as well as stocks. That risk reduction doesn't come free, though -- the price for calm is a lower overall expected return. Depending on the specifics of your holdings, it's quite easy to see your expected returns fall from the 10% to 11% range to the 8% to 9% range -- or even lower.

Get started the right way
Remember those three very important tools:

  • Money
  • Time
  • A strong plan

As you've probably noticed, there are several questions you need to answer before you can build and execute a retirement plan that works for you. Yet you must answer them if you want any chance of both retiring well and of reaching retirement without excessively sacrificing your quality of life along the way.

Knowing the right questions and how to find their answers are critical components to creating your plan. To help you get started, my colleague Robert Brokamp is offering an eight-lesson online seminar called "How to Plan a Perfect Retirement," starting Oct. 8. It's free to members of his Motley Fool Rule Your Retirement service. To learn more about a 30-day free trial, click here.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. FedEx is a Motley Fool Stock Advisor recommendation. The Fool has a disclosure policy.