Have you ever used one of those online sites that try to help you determine your income needs in retirement?  You know the ones…you put in your age, your assets, when you would like to retire, etc.  You spend time filling in the data, and then the results tell you that you need to save twice as much as what you have been saving and/or that you need to work a lot longer than you wanted.  The results scare you, or appear unrealistic, so you stop doing the planning you started.

Or maybe you have a broker from one of the Wall Street firms who has helped you try to determine what you need?  Invariably, the information that comes back says that you need to have enough assets to create an income stream that is 80% of your pre-retirement income.

I'm not going to go down the conspiracy path…that Wall Street pads the number because they make more trades and higher profits when you have to save and invest more.  Ok, maybe I went down the conspiracy path just a bit.

But do you really need 80%?  Wall Street has been brainwashed, and is now brainwashing us, with the idea that in order to maintain your lifestyle, you need 80% of what you were making before you retired.  

My real concern is that the 80% number has almost become a given.  Ask almost anyone in the financial services world, and they'll say that you need 80%.  I have even found myself, on occasion, saying that the rule-of-thumb is that you'll need 70-80%.  

But as a Certified Financial Planner®, I hate rule-of-thumb estimates.  They refer to an average, and none of us are average.  

Financial planning is not a one-size-fits-all world.  Most of us will see some of our largest budgetary expenses decrease dramatically in retirement…taxes, retirement contributions, commuting costs, etc.  It is important to know and understand your situation.  

80% is a fine number…and most of us will do very well if we are able to accumulate enough assets that will provide an income that is 80% of our pre-retirement income.  However, some of us will do well, and live comfortably, on 50%.  Some of us may need 100%.

I know many people that are living on 50-60% of their pre-retirement income and they are not eating cat food.  I know others who need 100%, or maybe even 110%.

And, things will change.  In the early years of retirement you may travel more, play more golf, or spend more on other recreation activities.  In the later years, you may have to spend more on health care.  

So, as in the other areas of financial planning:
•    Don't use rules-of-thumb…find out the specifics for your situation
•    Plan, but plan on being flexible
•    Monitor—we usually do at least an annual financial plan update with our clients
•    Update as necessary…as your personal situation changes