4. Understand how long your investments will have to last. In other words, how long you're likely to live in retirement.

There's a very good chance it's longer than you think. That's great news, of course. But it doesn't help your math.

The average life expectancy in the U.S. these days is about 75 for a man and 80 for a woman. Those data are from the U.S. census. And they're completely useless for retirement math.

Why? Because you are unlikely to be exactly average. And your fears are asymmetric. From a purely financial standpoint, you don't want to outlive your savings, even by a couple of years.

Furthermore, those life-expectancy figures are measured from birth, not from age 65.

Much more useful are the cohort survivorship figures calculated by the U.S. Department of Health. Of those who make it to 65, 25% will go on to live to 90, they show. Among women it's 30%. And of women who make it to 65, 12%, or one in eight, will live to 95. Quite a few, about 3%, will live to 100.

I have a couple of friends going very strong indeed in their 80s. Fortunately, they are financially secure. You do not want to find yourself there with your money running out.

In other words, to save enough for your retirement, you're going to have to set aside enough money to provide you with a suitable income for several decades. Think 25 years, maybe even 30.

5. And here's your answer. You now have the data to make some estimates.

Let's say you plan to retire at 65 and will need an income of \$10,000 a year from your investments. (We'll take that, as it's a simple place from which to start the calculations.) And you want to make sure the money will last up to 30 years.

How much will you need to save?

Some people will direct you to the annuities market for some answers. An immediate fixed annuity is a product from an insurance company that will provide you with a guaranteed income for life.

A 65-year-old man who wants an income of \$10,000 a year for life could buy an annuity for \$130,000. A 65-year old woman would pay a little more, \$140,000, because the insurance company figures she'll live longer.

So that's it, right? You'll need to save about 13 or 14 times the extra income you need? (Is your 401k going to provide enough? Find out with MSN Money's calculator.)

Not so fast.

Those annuities won't protect you from inflation. And that's a very big deal. Over 20 or more years, even modest rates of inflation will hurt you. An inflation rate of 3% will nearly halve your purchasing power.

There are, alas, very few annuities that offer inflation protection. A reasonably conservative investment portfolio, suitable for someone in retirement, can do better.

Think of a portfolio of inflation-protected Treasury bonds, known as TIPS, and high-quality blue-chip stocks. Although both offer lower returns than usual at the moment, most of the time you would expect a portfolio like this to earn an average return of inflation plus about 3% over the course of an economic cycle.

Based on those numbers, you probably need to set aside about 20 times your required annual income by the time you retire.

If you need your portfolio to generate \$10,000 a year and last up to 30 years, for example, you'd want to start with about \$200,000. If you need your portfolio to generate \$50,000 a year, you'd want to start with \$1 million.

6. And how to stop panicking. It's no wonder so few people want to do the math. They haven't saved anywhere near enough.

The most depressing data from each year's EBRI report are the numbers showing what people have actually saved.

Fewer than one worker in two has even managed to set aside \$25,000. Fewer than one in four has reached \$100,000 -- itself only enough to generate \$5,000 a year.

Yes, the numbers are slightly better for those who are older and nearer retirement. They've had longer to save. But even among them the picture is dismal. Among workers older than 45, just 54% have even managed to save \$25,000 or more.

Remember, this is after three decades of supernormal investment returns. Stocks boomed through the 1980s and '90s. Bonds have boomed for 30 years. Future returns from here are highly unlikely to be so favorable.

Those falling short will need to save, save and save even more. The sooner they start, the more likely they are to make it.

The one cheerful caveat: The EBRI numbers do not include the value of people's homes. If you have a lot of equity in your home, you can convert that into extra savings if you need to, either by selling or by using a cash-out reverse mortgage, which allows you to convert some of your equity into cash. (The financial planners I've spoken to on the subject point out that these mortgages typically involve high fees. But they are, at least, an option.)

For those facing a retirement-savings crisis, the strategies for adapting are well known but worth reviewing. They include scaling back, moving somewhere much cheaper and delaying retirement as long as possible, which works multiple levers. It gives you longer to save, it gives your savings longer to grow, it reduces the length of time you will need to live off your savings and it boosts your Social Security income. Even working part time can help.

There are no easy answers. But the real problem is that most people still don't even understand the questions.

Every so often, when I write about consumer products, I point out how much money people are taking out of their retirement portfolios in order to buy today's gadget or fancy trip or even a meal out. I get a few derisive emails from people wondering why I am "so stupid" as to think like that.

Now you know why.

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