Worried about your retirement?

Unless you're really young -- like, under 30 or so -- or a master market timer who went short just before last year's big market plunge, odds are you've had at least a moment or two of anxiety over your retirement prospects. Many folks who thought they were safely on track to a secure retirement are now confronting portfolio values that are down 40% or more from their highs.

If your hoped-for retirement year is in sight -- less than 10-15 years off, say -- you may be quite concerned indeed. After all, we could be in for a lot more pain before things get better. What are the odds that the market will recover in time to deliver the growth you need to meet your goals?

That's the question on lots of investors' minds right now. But there are better questions to be asking, ones that might yield more comforting -- or at least more useful -- answers.

Begin with the end in mind
Beginning with the end in mind -- in other words, having a clear goal -- is one of Stephen Covey's famous 7 Habits of Highly Successful People. The more precise your goal, the more detailed your vision, the better your chances of reaching it. Makes sense, right?

So what's your goal? How much money are you really going to need when you're retired?

The conventional way to answer that question is to come up with a reasonable annual figure and divide by 0.04 -- in other words, to assume that you'll be drawing down 4% of your nest egg every year. That calculation gives you a big number; bigger if you (or the online calculator you're using) throw in an inflation adjustment, as you should.

OK, you might say. I need to hit that number by age 65 or I'm toast. Hello, sleepless nights.

Daunting, isn't it? But before you give up and blow your nest egg on a giant bag of lottery tickets, consider this: You're probably going to be retired for a long time. You're probably going to have a significant chunk of your nest egg invested in stocks for many years after your retirement date. Assuming that the stock market gets back to doing its thing, that money is going to continue to grow.

And that means you don't need to have 100% of your retirement money accumulated on the day you retire.

So what do you need? And more to the point, when do you really need it?

You need enough money -- but when?
In the new issue of the Fool's Rule Your Retirement newsletter, available online at 4 p.m. EDT today, Foolish retirement guru Robert Brokamp offers a good way to figure that out. The key is to go out year by year -- Robert recommends 30 years -- starting with your planned retirement year, and to figure out the present value of the money you'll need.

If you're not familiar with the concept of present value, don't worry. It's pretty simple. Consider: You know that money that's put to work -- whether it's deposited in a savings account or invested in a stock -- is likely to grow over time. And if we know the rate of return, it's easy to figure out how much the money will grow. For instance, $148,000 invested at 10% for 20 years will come out to about $1 million. (You don't need a pencil to figure that out -- just use an online calculator.)

Present value is just another way of looking at that same information. In this case, we'd say that the present value of $1 million in 2029, assuming a 10% rate of return, is $148,000. Simple, yes?

Maybe it's not as bad as you thought
As Robert notes in his article, figuring out the present value of the money you'll need in retirement on a year-by-year basis will make a number of things clear. The biggest is this: You have a longer investment time frame than you might think, unless you're planning to cash out your nest egg on the day you retire and stuff the money under your bed. (Bad plan.)

Even if you're playing it safe and taking your money out of the stock market five to seven years before you need it, even if you're retiring tomorrow, you'll still be invested in stocks for 10 years or more after you retire. That gives you plenty of time to follow any of a number of strategies:

  • You could go with top-rated dividend machines like 3M (NYSE:MMM), Novartis (NYSE:NVS), or Waste Management (NYSE:WMI) for solid income.
  • Alternatively, strong small caps like Sykes Enterprises (NASDAQ:SYKE) or Morningstar (NASDAQ:MORN) could lead the first phase of the next bull market.
  • Disruptive up-and-comers like Axsys Technologies (NASDAQ:AXYS) or NetScout (NASDAQ:NTCT) could become tomorrow's technology giants, meaning big profits for you.

Regardless of which you pick, 10 years is plenty of time to get great results.

And what that means is that you may be in better shape than you think, last year's market madness notwithstanding.

If you'd like to read Robert's full article -- and I heartily recommend that you do -- and try some of these calculations for yourself, help yourself to a 30-day trial of Rule Your Retirement. It's completely free of charge with absolutely no obligation to purchase. Just click here to get started.

Frustrated with your 401(k)? Even if your employer's plan isn't the greatest, you don't have to give up your dreams of a happy retirement. Get the tips you need to turn your retirement savings around in our special report, "How to Make the Most of Your 401(k)" -- just click here for instant free access.

Fool contributor John Rosevear has no position in the companies mentioned. Novartis is a Motley Fool Global Gains recommendation. Waste Management is a Motley Fool Income Investor selection. 3M and Waste Management are Motley Fool Inside Value picks. Axsys Technologies and Morningstar are Motley Fool Stock Advisor selections. The Fool owns shares of Morningstar. Try any of our Foolish newsletters free for 30 days. The Motley Fool has a disclosure policy.