Your retirement years can be a lot more fun if you have plenty of money to spend. While you may not be able to live it up during your working years, you can spend that time setting yourself up to retire wealthy.
Different people have different standards for what wealth means to them. Here we'll define it as having more money than you need. So rather than picking some seven-figure dollar amount and saying, "When I have that much, I'll be wealthy," you should try to figure out how much income you'll need and then work backwards from there.
For example, let's say you've added up your expenses and decided that having $4,000 a month of income would be more than enough to cover your costs during retirement (and let's say your home will be paid off by then, so you won't need to factor in a housing payment). You look up your Social Security statement and see that you can expect to receive $1,300 a month in Social Security benefits. That leaves you $2,700 per month that you need to generate from your retirement savings, or $32,400 per year. Assuming you take an average of 3.5% of your entire retirement savings out of your accounts each year (a nicely conservative figure), you'll need just over $925,000 in your retirement savings accounts by the day you retire ($32,400 divided by 0.035 is $925,714.28). As you age, you'll be able to take more than 3.5% out of the accounts, but assuming a conservative withdrawal rate gives you a better safety margin when planning how much to save.
Source: Fool.com