How to Retire Without Becoming a Billionaire

It's already hard enough trying to come up with a realistic scenario for saving enough money to retire when you want. You certainly don't need to make things harder on yourself by shooting for an unreachable, unnecessarily high target for your nest egg.

Sure, lots of uncertainties surround the decision of how much to save for your golden years. High medical costs, questions about whether Social Security and Medicare will stay solvent long enough to support you once you retire, and what future returns you should expect from your investments are just a few of the issues that everyone has to deal with in planning for retirement.

You might think you'll need millions and millions of dollars to eliminate all those concerns. But even with those uncertainties, there are a few things that you can control -- and they'll make a huge difference in deciding how much money you need and how you invest to reach the goals you set for yourself.

Top tip: Plan your standard of living.
Remember, even if you have the perfect savings and investment plan, you've only finished half the job of preparing for retirement. To complete the picture, you also need to know how much you're planning to spend after you retire.

To keep things as simple as possible, most retirement calculators assume that you'll need a level of income that's just a little less than what you earn in the years immediately before you retire. While that's not a completely ridiculous assumption to make, you shouldn't just blindly accept it. Consider why using a number based on your income might be totally off-target:

• You're a supersaver. If you've demonstrated an ability to save 30% or more of your pre-tax income during your working years, then you already know that your income bears little resemblance to your spending needs. Base your future spending on your current spending habits, not your income.
• You have simple wishes. Sure, plenty of people have dreams of taking up expensive hobbies, traveling the world, or buying a pricey second home after they stop working. But if staying close to home with family and friends or volunteering your time sounds more like what you have in mind, you won't need a huge income to support yourself.
• The hard work is over. Often, retirement corresponds closely with the time when major financial commitments start to end. You've probably put your kids through school, your mortgage is often close to being paid off, and you've hopefully eliminated the rest of your debt. So if your income was enough to cover all those obligations, it should be more than enough now that they've gone away.

If any of those considerations describes you, then you may not need as much to retire as you think. That, in turn, may make it easier for you to invest for retirement.

Invest smarter
Above all, what many retirement savers have learned during this bear market is that they took on more risk than they should have. Those who thought they had to get better returns from their investments, however, clung to overpriced stocks on unsustainable growth paths. Back in 1999 and 2000, even if you believed that Yahoo! (Nasdaq: YHOO), Cisco Systems (Nasdaq: CSCO), and other Internet-related stocks were in a bubble, you still may have held on, hoping to cash in before it was too late. More recently, you may have overinvested in high-flying financials like Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS). Unless you had good timing, you may well have lost more than you gained from those investments.

Having a more modest target means you can build a more conservative portfolio. That doesn't mean passing up entirely on Apple (Nasdaq: AAPL) or other stocks with good growth prospects. But it means you can focus on safe, dependable stocks with solid businesses -- recession-proof stocks such as burger maven McDonald's (NYSE: MCD) or General Mills (NYSE: GIS), for example -- as well as diversifying assets into bonds and other less volatile investments.

The biggest downside of lowering your expectations in retirement is that it potentially could leave you with less of a cushion if investments perform poorly during your post-career years. However, if you can get comfortable with the idea of being more frugal, it could make the difference between retiring on time and never retiring at all. For most people, that's the easiest decision in the world to make.