The Week - The 80 percent rule is one of the classic rules of thumb for retirement advice. Financial planners often advise that in order to maintain your current lifestyle in retirement, you should aim to replace 80 percent of your working income from your retirement resources such as Social Security, investment dividends, and IRA withdrawals. From that point, you gauge the total amount of money that you need based on when you plan to retire — in other words, how many years you are likely to need income.
Recent research has challenged the concept of the 80 percent rule as useful but too simplistic and conservative. Professor Michael Finke from Texas Tech University outlined his approach in an article in Research magazine. Finke finds that the 80 percent rule as commonly applied likely overestimates the amount of money that retirees will need.
Read the story here.