established many generations ago when the average life expectancy was below 65. Thus only a small proportion of people actually got to retire! These days, many people live active lives well into their eighties and actually hope to be in a position to retire before they are 65.

Glorious though this may seem in theory, in practice it involves a lot of planning well ahead of retirement in order to ensure that the funds you have saved up are sufficient to meet your needs when you cease to have a regular pay cheque. Imagine the shock or reaching your 80th birthday and finding you have run out of money.

What prompted this article is a call received this week from a lady seeking investment advice. She wanted to know how much she needed to have saved before she could consider retiring. She had heard at a seminar that the figure was $350,000! Obviously there is no set figure as it depends so much on individual circumstances. We can take steps to arrive at an approximate figure, but as circumstances change we must be sure to revise our estimates.

The first thing to remember is that it is never too early to start planning for your retirement. As soon as you are receiving a regular income, and incurring regular expenses, you should be thinking of putting aside a set amount each month. Many employers and Government-run pension funds to do this for you, but quite often the resulting pension is insufficient to maintain your accustomed lifestyle. You are responsible for how well you live during your retired years so don't rely just on others to provide for you.

There are two advantages to starting early. Firstly, you get into good habits.

It is very easy to promise yourself that you will start to save once your pay cheque gets a bit bigger, but there are always temptation to spend any increase when it comes along. Secondly, the longer you save the longer you have for those savings to work for you. Saving $6,000 per year at 5 percent interest will give you under $200,000 after 20 years but over $725,000 after 40 years. Doubling the time frame almost quadruples your savings! How do you know how much you can afford to save each year? Start by keeping a record of your income and expenses on a monthly basis. If you earn $3,000 per month and spend $2,000 per month can you afford to save $1,000 each month? Probably not, because there will be occasions when you need to spend a lump sum on a new fridge or a holiday. Do you actually have $1,000 left over each month? Again, probably not because while your sources of income are few your avenues of expenditure are many and you will probably have forgotten to record some. Be realistic when deciding how much you can save. It is better to start of saving too low and have the pleasure of increasing the amount rather than start off too high and feel failure at having to reduce it. Also, save methodically. Don't rely on having the money left at the end of the month.

Rather, put it aside the day your pay check arrives and don't be tempted to touch it except in an emergency.

Based on your record of expenses, you should be able to come up with a reasonable estimate of how much you will need to spend each year once you retire. It will probably be less than you spend now, but don't underestimate it. You don't want to face a retirement of scrimping and economising.

Now the hardest part -- decide how long you will live! This is obviously impossible to get right, so you have to make a reasoned guess based on your health and family history. Each generation tend to live longer than the last, with better food and medicine, so be generous when allocating yourself a life span! Now combine the figures and see when you can retire.

As an example, let us assume we are 30 years old and can save $6,000 per annum and earn a return of five percent per annum on our savings. If we retire at 60, we shall have saved $400,000 over the 30 years. If we incur expenses in retirement of $30,000 a year, we will need to draw down $10,000 of our savings in the first year in addition to the $20,000 interest ($400,000 at 5 percent).

So next year we will have $390,000 of savings, earning interest of $19,500 requiring a draw down of $20,500. Each year our savings get drawn down by an increasing amount and after 22 years they are used up. In other words, at the age of 82 we have no money left. If we only live to 80, all well and good. If we live to 85, though, it is too late to start wishing that we had saved a bit more or started saving a bit earlier.

One final warning. All of these calculations ignore inflation. The 5 percent available on a bank deposit is worth just one percent if there is inflation of four percent per annum. So choosing where to invest your savings is as important as saving itself. Over the long term, investing in equities through mutual funds provides one of the best returns on your money.

The key to successful investing is knowledge. By all means attend seminars and read books on the subject, but bear in mind that the information you receive is based on averages. There is no substitute for obtaining reputable independent investment advice geared to your own personal circumstances.

Andrew R. Doble is president or Ardent Investment Management Ltd., a founder member of the Bermuda Association of Securities Dealers.