There are a number of rules of thumb associated with saving up for retirement.

Most of them, though, focus on amassing a nest egg.

This nest egg should be big enough that when you withdraw about 4% a year, it should be earning a return that allows you to meet your yearly expenses (when combined with your Social Security income, of course).

Another thing you can do, though, is save for retirement focusing on creating income streams that provide for your monthly needs.

Determining Your Monthly Requirements

The first thing you will need to do is determine your monthly expenses in retirement.

For most people, this requires estimating what will be spent during retirement. You can base your monthly expenses on what you spend now, though. Perhaps you will have your mortgage paid off by then, or your other debts paid off. Many choose to determine that these amounts will still be spent — but on something else (such as travel or a hobby).

Once you know your monthly requirements, you can factor in your income from a retirement account and from Social Security. Be careful, though: Social Security benefits may be reduced in the future, and you never know what will happen with retirement investments. Retirement calculators can help you figure out how much of your income you should be setting aside to reach a certain goal. Many “regular folks”, though, understand that they might not be able to amass a huge nest egg in time to retire. The good news is that you don't have to create a huge nest egg if you instead focus on developing different income streams.

Cultivating Income Streams For Retirement

Once you know approximately what your monthly income needs will be in retirement, you can start looking for ways to cultivate income streams for retirement. Relying on once source of income to meet your needs can present problems down the road. If that source of income fails, then you may find that you are unable to meet your needs at all. Starting to develop different income streams now can benefit you in the future.

There are a number of things you can do now to build a foundation of passive income that can last during retirement. Plus, you can use the money you earn now to build a nest egg. Some possible items include:

• Royalties: When you create something, you can generate regular income. Selling ebooks, or music, or writing a book can be a way to generate income. Look for ways to use your creativity.
• Business: Start a business. You will build up revenue, and after a while you can continue to earn money. Even if you turn the business over to someone else to run after you retire, there are still ways to ensure that you receive a revenue stream from the business.
• Rental Property: If you can deal the inconveniences of renting, and if you can buy a rental property, it can be one way to prepare for the future. Start now, and the rent paid by tenants will pay off the mortgage. Hopefully, by the time you are ready to retire, the mortgage on the property will be paid off and you can receive an income stream from that.
• Web Sites: These days, you can earn income from a web site. Affiliate programs and ads provide you a way to earn a regular income indefinitely, as long as you take the time to set it up now, and maintain it.

There are other options as well, including freelance work and part time work. With some planning, you can diversify your income so that it meets your retirement needs — without a massive nest egg.

Do you have other suggestions for creating ongoing income that you can use in retirement. Tell us your ideas in the comments!