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How much will you need to enjoy your retirement?

The stereotype for retirement is fishing, gardening, horseback riding or playing golf — and not doing much else.

The classic idea of retirement as a life of uninterrupted leisure is evolving. With people living longer, they’re more active in early retirement, and many choose to focus this energy on a retirement lifestyle much different from the stereotype. They do volunteer work, start new businesses (preferably that don’t require a lot of capital), take care of their grandkids during the day or work part-time to stay busy. Of course, many retirees work part-time to reduce the strain on their savings.

How much do you need to retire? In 2006, Lee Eisenberg published a book on the subject titled “The Number,” prompting many to ponder how much they’ll need. Today, financial services companies run TV ads saying you should know that number. While this may be a bit oversimplified, it has some validity.

The resources needed for retirement vary widely with individuals and circumstances, but there are some established ways of estimating how much you’ll need and how much you can spend:

• Retirement income — from all sources, including an investment portfolio that you’ll gradually cash in during retirement — can be expressed as a percentage of the final working income (less than 100 percent because you’ll be drawing Social Security and possibly other benefits, such as pensions). Estimates of this percentage tend to range up to 85 percent. If you’re paying a lot of greens fees and going on a lot of cruises, you’ll probably need the full 85 percent, if not more. But if you’re involved in a post-career pursuit that brings in some money, you may be able to get by with less.

• Calculate the multiple of your final working income that you should have saved by retirement. One rule of thumb puts this at eight times your final annual income. According to this, if you’re earning $75,000 on the cusp of retirement, you’d need a nest egg of $600,000.

This rule is based on the concept that most people’s spending patterns don’t tend to change much. If you cut way back on expenses in retirement, you may get by with a lower multiple. But if you go gaga, using your newfound free time to spend, that’s another story.

You can take control of these variables by setting a retirement budget with realistic goals and sticking to it. If you count the value of your pre-retirement home toward the total wealth you can spend during retirement, you can’t gear your budget to allow more spending just because you sell it and move into a less expensive home (like a condo in Florida).

• Withdrawal rate. This is the rate at which you can spend your nest egg without running out of money, expressed as the annual percentage of your total resources you can spend each year. Much has been said and written about this, and some discussions have centered on longer life spans, meaning people need more resources and a lower withdrawal rate to keep from running out of money.

Peter Lynch, an uber-advisor of the 1990s, famously designated 7 percent as the ideal withdrawal rate (the 7 percent solution, he called it), but that was when the bull market was running wild with high returns that didn’t last. Many advisors now recommend 3 to 5 percent, aiming more at 3 percent since the 2008-09 market meltdown. Flexibility in adjusting your withdrawal rate to adjust for events is as important as the rate itself.

Naturally, it doesn’t make sense to set a withdrawal rate without a good fix on the total you withdraw from. However, having a withdrawal rate in mind helps you think about how much you’ll need. Even if you’re over 50 and have saved little, it’s not too late. Waving the white flag of defeat isn’t an option, so do what you can.

Ted Schwartz and Jamie Cornehlsen are advisors with Capstone Investment Financial Group in Colorado Springs. Cornehlsen is also president of Dunn Warren Investment Advisors in Greenwood Village. Reach them at [email protected] or [email protected]

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