07/28/2014 04:16 pm ET Updated Sep 27, 2014

Retirement Planning 101: How to Save for the Future

By Paula Pant, WiserAdvisor contributor

You might think that you're savvy at managing money. You avoid credit-card debt. You have an emergency fund. You pay every bill on-time.

But no matter how well you're managing your money now, you need to also be thinking about retirement. (Yes, even if you're only 25 or 30.)

The good news is it's never too early to start planning for your retirement. It's also never too late, if you've been slacking up to this point.

How do you go about doing it? Get started with these three key steps:

#1: Set A Goal

First, choose the ideal number that you'd like to have in your portfolio on Retirement Day. It's hard to plan when you don't have your "end number" in sight.

How do you choose this number? While no one can predict the future, there are ways you can approximate how much you'll need for your retirement.

One retirement strategy advocates that you aim to replace 70-85 percent of your working income. The idea is that this 70-85 percent represents how much you're currently spending to maintain your lifestyle. (Theoretically, the other 15-30 percent is being put towards retirement savings and other expenses that you won't need during retirement, such as commuting costs, tailored suits, and dry cleaning). When you retire, 70-85 percent of your working income should allow you to keep up the lifestyle you're currently enjoying.

But that strategy implicitly assumes that you're spending 70-85 percent of your income -- and that's not always the case.

An alternative strategy recommends that you save 25 times your annual expenses in your portfolio. For example: If you currently spend $40,000 per year, you'll need $1 million in your retirement portfolio. ($40,000 x 25)

Again, this would allow you to maintain your current lifestyle from the typical retirement age of 65 to a projected age of 90. (If you plan on being one of those people celebrating their birthday well into their 100s, you will need to save a bit more.)

This strategy focuses on your current spending, rather than your current income. It drops the assumption that you must be spending a particular fraction of your earnings. But this strategy has drawbacks as well.

Your expenses can change once you reach retirement. You'll no longer have job-related expenses, like paying for a commute, and (hopefully) your mortgage will be paid off. In other words, your cost-of-living might drop.

But on the other hand, you may have new expenses, like medical bills. You might need to pay for the housework and yard care that you used to be able to perform yourself. And you may want to spend more money traveling, boating, golfing or pursuing other hobbies.

#2: Set a Plan for How to Get There

Use a retirement calculator or talk to a financial planner to see how much you'll need to save, each year, to reach your goal. This depends on several factors, including your age, your current portfolio balance and assumptions about any future returns.

Bear in mind that this annual amount can always be adjusted if your financial circumstances change -- if you receive a promotion or your business starts bringing in more revenue, you can always increase your rate of savings to reach your goal faster (or have more money to enjoy when you retire).

#3: Start Saving!

There are two components to successful saving: earning more and spending less. The more money you have coming in, and the less money you're sending out, the more you're able to put towards your retirement.

Consider additional sources of income to supplement your portfolio, Social Security and pension. Maybe you can start teaching piano lessons from your home, or you can sell off that lifelong baseball card collection. Maybe you turn your love for baking into a side business and get paid to make cakes for weddings and birthday parties.

Also consider ways you can cut back on your current expenses. Can you start shopping for generic brands, bundle your phone and internet service, or handle your own home landscaping? Every little bit you can shave off your expenses now will help you down the road.

The Bottom Line

Once you choose a savings goal (such as $1 million in your portfolio), you'll have an easier time creating a "roadmap" that can help you reach that goal.

Using a retirement calculator or speaking with a financial planner will help you understand how much you need to save every month in order to hit your target.

And once you know how much money you should save monthly, you'll just need to focus on the day-to-day of increasing your income and/or trimming back your expenses.

The most important step, though, is to get started. The earlier you start saving for retirement, the better.