Saving for retirement is one of the biggest financial challenges you'll ever face. When you're still working, you (hopefully) bring in a big enough paycheck to provide for all of your needs and then some. Yet on that fateful day when you retire, you'll suddenly have no paycheck at all -- and years of expenses staring you in the face.

The challenges of trying to plan for your retirement finances are tough enough that many workers are just skipping the idea entirely, figuring that they'll just work forever. But giving in to despair just doesn't make sense, because even though it's tough, you can still make a strategy for your golden years that will work. Below, I'll even share one thing you have going for you that you might not have realized -- and some of the investing ramifications it holds.

In this month's issue of Rule Your Retirement, Fool retirement and personal finance expert Robert Brokamp takes a look at the math behind saving enough to retire. His first point is the obvious one: With so many unpredictable factors to take into account, the quest to find a "magic number" to target for your nest egg is an exercise in futility.


But one area in which you may have some flexibility is on the expense side of the equation. Although many financial planners suggest that you may need 70%-80% of what you were making before you retired in order to sustain your standard of living, the statistics don't actually bear that out. Here are some highlights comparing what 65- to 74-year-olds spend in certain categories versus what 45- to 54-year-olds spend:

  • Eating out: 32% less.
  • Transportation costs: 34% less.
  • Apparel and services: 40% less.

Moreover, that doesn't even include some of the big-ticket areas. With income reduced, taxes get cut by two-thirds, and contributions to Social Security and pensions fall even more dramatically. All told, expenses are almost 30% less -- and those numbers fall even more quickly for those age 75 or older.

Given the big demographic shift that the nation is going through right now, these figures have some long-term implications that investors should consider. Although many investors have jumped on the health-care bandwagon as a way to play an aging population, some other trends may be less followed:

A population that eats out less would have a negative impact on mid-range restaurants, especially those that cater to older clientele. That means Buffalo Wild Wings (NAS: BWLD) , which aims at a younger demographic, might escape the trend, but Darden Restaurants (NYS: DRI) and its Red Lobster and Olive Garden chains could see stronger headwinds. On the other hand, as lower-priced eateries, McDonald's (NYS: MCD) and its fast-food peers could well benefit from the shift.

The problems that Talbots (NYS: TLB) and Coldwater Creek (NAS: CWTR) have faced recently are only likely to continue, as the customers they've relied on move on to retire and need fewer clothes.

But, investing aside, what these figures suggest is that you may not have to save quite as much for retirement as you might have thought. As a result, even if you're going to fall short of whatever number your favorite retirement calculator spits out, you shouldn't lose hope. With some adjustments to your spending, you might well be able to make ends meet on far less.

Of course, not all costs go down in retirement -- and you can't control all of your spending. Health-care costs in particular rise dramatically as you age, and they're often not negotiable -- and not something you can safely avoid. That's why you still need a healthy nest egg.

But the good news is that if you're been afraid that your retirement is doomed from the start, adjusting your cost assumptions may give you a more realistic picture of what your retirement years will be like. If that makes you more optimistic about your chances, then that will only help you to follow through on your retirement planning.

The right investments can make a huge difference in how you live your golden years. In The Motley Fool's special report on retirement, you'll find revealed the names of three promising stock picks for long-term investors. It won't cost you a thing, but don't wait; get your free report today while it's still available.

At the time this article was published Fool contributor Dan Caplinger gets closer to retirement every day. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of Buffalo Wild Wings and McDonald's, as well as writing covered calls on Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy never retires.

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