One of the trickiest things about saving for retirement is figuring out how much money to sock away. After all, if that period is many years away, determining what your monthly living costs will look like can be difficult.

But the one thing you should always do in the course of your retirement planning is err on the side of assuming that your senior years will cost more than you think. If you don't, you may end up with a nest egg that really falls short.

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Will your savings suffice?

Many people aim to sock away 10% of their salary for retirement. That's certainly respectable. But it's also an outdated convention.

Due to the way senior living costs have risen (notably, with regard to healthcare), workers today are advised to set aside 15% to 20% of their earnings for retirement. And if that figure seems extreme, you may want to keep the following things in mind:

  • The average 65-year-old man retiring today will spend $143,000 on healthcare in retirement, while the average 65-year-old woman will spend $157,000, reports Fidelity
  • The average cost of a home health aide is $54,912 a year, reports Genworth, and at some point, you may need one
  • The average annual cost to reside in an assisted living facility is $51,600, according to Genworth
  • The average yearly cost for a shared room in a nursing home is $93,075, says Genworth

Now all of these costs are healthcare- and health-related. But think about the other expenses you'll encounter as a senior, from housing to transportation to food.

And let's not forget entertainment. Once you stop working, you'll need a way to stay occupied. That could mean having to spend money to maintain your sanity and avoid excessive boredom.

All told, it's easy to see why you may end up needing a larger retirement nest egg than anticipated -- and why socking away a mere 10% of your income may not cut it. And so if you've been underfunding your IRA or 401(k) plan thus far, it's time to rework your budget and find ways to carve out more money to put into your savings.

That could mean trimming some basic expenses. You'd be surprised at how a few modest changes could mean getting to put hundreds or even thousands more into your retirement plan each year. Or, it could mean picking up a side job and using your earnings to pad your savings.

It's not just about saving more

Of course, saving more is only part of the equation. To really grow your savings, you'll also need to invest aggressively -- namely, by loading up on stocks while retirement is still many years away. If you play it too safe with your IRA or 401(k), you'll risk stunting your savings' growth.

To illustrate the importance of investing in stocks, say you manage to fund your nest egg with $500 a month over a 40-year period. Play it safe with bonds, and you may only see an average annual 4% return, which would leave you with $570,000. But if you go heavy on stocks, you might see an average yearly return of 8%, leaving you with a total of $1.5 million in savings.

Don't sell yourself short

The last thing you want to do is wind up cash-strapped during retirement. To avoid that fate, don't just save 10% of your earnings for the future. Instead, increase your contribution rate. And also, don't shy away from stocks in your IRA or 401(k). Sticking to these rules could be your ticket to the financially secure retirement you deserve to enjoy.