No. of Recommendations: 2
Use a spreadsheet or a crayon and napkin to determine what your income requirements are in retirement. Using 75% may or may not be representative of what a person needs. Looking at my own needs, I may need only about 25% of current income.

If we could see the future or travel through time, we'd know exactly what our income replacement would be. Sure, it could be 25% of final working year household income, just as it could be 42% or 12% or 115%. But longitudinal research has shown that most will fall between 70 to 80%, where the higher the household income, generally, the lower the replacement ratio becomes and the lower the household income, the higher the replacement ratio.

As one approaches the first retirement year, the actual household cash flow analysis determine the required income, not in a %, but in an actual dollar amount. The further one is from that first year, just like determining the annual funding requirement for a pension, the more one must rely on reasonable assumptions.

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