How big a ‘nest egg’ do you need to retire?

“For a lot of people who are young and have mortgages and have college tuition to save for and a lot of mouths to feed what the program is saying is, ‘Don’t save a whole lot when you’re young, and save a lot right before retirement — which is what most people do,” he said.

Starting later in life means missing out on the powerful boost that compound returns can provide the early saver who amasses a nest egg that can grow for decades. But Kotlikoff says no matter when you start saving, you’ll be better off with a more realistic approach to the ups and downs of income and spending that inevitably crop up once you’re retired.

If your retirement investments have a bad year, you can postpone buying a new car. On the other hand, if your returns are above average, that may be the year to splurge on a cruise.

“Our dynamic programming model says people are going to adjust their spending based on how they do in the market every year,” he said.

Kotlikoff’s software virtually eliminates the risk you’ll outlive your savings target by assuming you’ll live to be 100. By doing so, the software also assumes you’ll spend your savings down to zero — which some conventional retirement plans don’t. That, along with better forecasting of changes in actual retirement spending, means some people can do a lot better than they think by saving less than conventional retirement calculators tell them to, he said.

Regardless of their planning process, several retirees told msnbc.com that managing spending and cutting expenses have had as much to do with maintaining a comfortable lifestyle as the effort they made on saving and maximizing their retirement income.

Earl Skovsgard, a retired policeman in Port St. Lucie, Fla., said in a recent e-mail that after paying off some big expenses, his retirement plan is working out pretty well. With two kids in college (most of which they’re paying on their own), a house and two cars paid for, the couple is living comfortably on his police pension and Social Security, supplemented by his wife’s part-time income.

“I am obviously not able to live at the French Riviera,” he said. “But if you eliminate some of the bigger-ticket items, like paying off the house, and buying an economy car that you can afford to drive, you can live well on a lot less than you think.”

Bill Murphy, who worked in data processing jobs for several large companies, decided after taking an early retirement in his mid-50s that he needed to keep working a little longer to make his retirement numbers add up. Now fully retired, he and his wife have “downsized” from the Detroit suburbs to a bigger house in Indianapolis. About a third of their current income comes from savings and the rest from pensions and Social Security. By withdrawing about 2 percent a year from his investments, he’s able to supplement his pension income and still watch his savings grow.

“I live a very comfortable life; I’m not extravagant,” he said. “I buy a new car once every 10 years. A couple of times a year we can go to both coasts and see the grandkids.”

Murphy says his retirement plan relies on a simple, one-page running financial analysis that he does once a month or so. He sets a spending limit on his credit cards; if he needs to go over that, he borrows from savings and then “pays it back” with the next interest payment from a bank CD.

“You match your expenses to your budget,” he said. “If I go over, it’s not the end of the world.”

Unfortunately, for some future retirees, no monthly savings goal is attainable. Don Voge, 42, works full time for a real estate title company in Minneapolis and figures he still has time to save for retirement. But a series of unexpected medical expenses forced him to refinance his home with a subprime mortgage that is now consuming 65 percent of his take-home pay and will soon rise to consume all of his income, he said.

“Retirement is something that’s going to happen 20 years or so, but I will likely lose my home in the next year,” he said. "So it really doesn’t matter thinking about retirement savings when I could be homeless in a matter of months.”

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