What are you looking forward to when you retire? Spending time with your family or hopping the globe? Finally being able to pursue special interests or opening a new business? Never working again or just choosing when and where you want to work? Go ahead. Give yourself permission to envision the lifestyle you really want. It's the only way you'll truly be motivated to take the steps necessary to get there.

Now it's time to get practical. How much is it going to cost to live the life you want? Keep in mind that some expenses will likely go up in retirement - like health care, insurance and travel. Others may go down, possibly your housing and transportation costs. Of course, it all depends on the lifestyle you choose. But now's the time to get a good handle on how much you're likely to need. A good way to start is to estimate the cost of your basic needs, as well as your non-essential lifestyle needs.

Next question... Where is all that money going to come from? Half of the income for retirees age 65 and older comes from Social Security and employer pension plans. The remaining amount comes from personal savings and earnings.

As you inventory your resources try grouping them into these major categories:

Guaranteed income sources. There are only three sources of income guaranteed to continue for Life: Social Security, an employer pension plan and annuities.^1,2 

Part-time/temporary income. Don't forget about rental income, part-time work or one-time asset sales.

Personal savings and Investments. Under this category, list your 401(k) and other employer-sponsored retirement plans, IRAs, bank savings, mutual funds, and individual securities you plan to use for retirement income.

¹ Annuity guarantees are based on the claims-paying ability of the issuing insurance company.

² Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. 

Once you've itemized and grouped expenses and resources, you're ready to match them up and identify any gaps.  Your first priority?  Make sure your basic needs will be covered by earmarking guaranteed income to pay for them.  The greater the percentage of income that's guaranteed, the more confidence you'll have throughout retirement.

That leaves the income generated by your other savings to cover any basic needs gap, as well as your discretionary expenses.  You can then match up any part-time/temporary income to fund short-term or one-time expenses.