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It's amazing to me how many of us go through our working years without too much thought of how we'll live when we retire. Thing is- we want to be able to stop working at some point and enjoy our retirement years, but the only way to do that is to be financially prepared.

How do you know how much money you will need to retire? Try the following steps:

1. Calculate the cost of your current living expenses. Statistics say that when we retire, we will need around 70% of the income we live on while working. This is probably not an accurate figure for most of us anymore, since we tend to live longer than we used to, retire earlier than we used to which means we tend to travel and have more entertainment expenses when retired, and then don't forget that as people age more medication and visits to the doctor are typically required.

It's not wise to depend on Social Security for those of us in are 20's now, since there is no real guarantee the money will be there when we're ready to retire, but right now people retiring can expect Social Security to replace 45% of income for middle-income American's.

If your home will be paid off before you retire, you will not have to worry about paying a mortgage, but older homes tend to need more money for maintenance costs.

If you are able to pay off your debt before you retire, you will not have to make monthly payments for credit cards or loans, which can reduce your living expenses considerably from what they may be now.

2. Determine your desired retirement income. Some people are able to cut costs dramatically when they retire (as discussed above, paid off mortgages and becoming debt free can make a huge difference to the amount of income you need), while others plan additional expenses for their retired years that actually requires having more money during retirement than when working.

If you plan to travel to visit family or for vacations, your income will need to be able to support the traveling lifestyle. Many retired people look forward to traveling, and if this is your intention you'll want to be sure your income is enough to make it happen.

Are you going to relocate? Some retired individuals or family move to another state or location with a lower cost of living and this can help you reduce your necessary living expenses. Plus, if you sell a house you might have a profit to add to your retirement fund, or to use towards the purchase or rental of a less expensive home.

When you are retired- will you have any sources of income? Some people work part time because they want to do something, others have passive sources of income through businesses they own or investments made. This will reduce the amount of money you need to save for retirement.

3. Remember to account for inflation. Life is more expensive with every passing year, so you have to consider that when figuring the amount needed for your retirement years. For example, the amount you can live on comfortably in your first year of retirement may be tight during the fifth year and not enough during your tenth year! Experts say to assume an inflation rate of 3%.

4. Try to predict the number of years you will be retired. How old do you want to be when you retire? Ok, now how old will you realistically be when you retire? (These two numbers are usually very different!) Then think about how many years you will live beyond your retirement day. You can use life expectancy calculators or you could just guess, but you need to have an estimate of years in order to estimate the amount of money you need for retirement.

5. Plan, budget, figure it out. What you can do is add up the money you'll need each year of retirement, accounting for inflation and your lifestyle, and then add up the money for each of the years you'll be retired. Then, save. Most people find their retirement number to be out of reach for regular savings, so you'll probably want to use investment strategies to help you reach your number. A financial advisor can be extremely helpful with this. It's recommended that you set aside 15% of your gross annual income for retirement.

CNN Money offers an interactive retirement calculator you can use to help figure out costs.