How much should you save for retirement? The true answer is that no one knows. However, Barbara Friedberg is sure of one thing -- those who start their retirement planning and save early often will end up in much better shape than people who begin saving in their 40s or later. Retirement planning in your early years of life will save you from facing financial hardship during your retired years.

However, the lecturer at the Leavey School of Business at Santa Clara University and editor in chief of BarbaraFriedbergPersonalFinance.com says do not worry if you are among the procrastinators -- all hope is not lost.

What is the correct amount of money that people should save for retirement on a percentage basis? Should it be 10 percent, 15 percent or 20 percent?

In general, it is best to save as much as possible and even more importantly to start as soon as you begin working. If a young adult starts her retirement planning in her 20s, she does not need to save as much as a person who starts saving in her 40s.

For example, Jill starts investing $300 per month in a diversified all-world stock index fund at age 25. She continues to invest the same amount per month until age 65. Over the 40 years, she invested a total of $144,000 and at age 65, she amassed $770,000. Assume an average rate of return of 6.9 percent over the 40 years.

If Jill earned $45,000 at age 25, then that $3,600 per year was only 8 percent of her salary. As her salary grew, the percent of her salary invested was even less than 8 percent.

Consider Jack, who didn't start investing until age 40. Assume Jack earned $60,000 per year and decided to save 15 percent of his salary, or $9,000 per year, for retirement. He invests in the same diversified all-world stock index fund as Jill. For simplicity's sake, assume he continues to save $9,000 ($750 per month) until age 65. The total amount Jack invests is $225,000. At age 65, Jack's retirement savings equal $598,025.

Jill invests less money, starts earlier than Jack and ends up with more wealth in retirement. The best retirement strategy is to start young. Start later, and you need to save a lot more than those who begin earlier.

Longevity risk -- the risk of outliving your money -- is a big issue for people about ready to retire. Companies now are offering their former employees a choice between a lump sum and a regular pension check. Companies hope the lump sum offer is accepted so they can offload the longevity risk. Who should bear this risk?

The companies who initially offered the pensions are under a social (and usually legal) contract to uphold their obligation.

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Early savings could pay off later in retirement