Get a better handle on estimating the replacement income you'll need in retirement.
How do you know if you need to save more for your retirement, are right on target, or are going overboard?
The rule-of-thumb formula is to plan to live on 70% to 80% of your preretirement income during your retirement years, while increasing your replacement income annually at the inflation rate for 30 years.
This is a reasonable starting point.
But these assumptions can over or underestimate the true cost of your retirement. One size does not fit all. Your actual replacement income requirements will more realistically range from 54% to as much as 90% of your preretirement income.
One important factor in determining your replacement rate is your proportion of pretax expenses (contributions to a 401(k), for example) to post-tax expenses (contributions to a Roth, mortgage payments, and so forth).
The more you put aside in pretax retirement accounts before you retire, the lower your replacement requirements.
To help you evaluate other factors that affect your replacement rate, consider:
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