Will You Really Need to Replace 80% of Your Preretirement Paycheck?

ArcaMax - If you have sought advice on how much to save for retirement, you've likely run across the "80% rule." For a secure retirement, the theory goes, you should aim to replace roughly 80% of your preretirement paycheck with portfolio withdrawals, Social Security, pensions and other sources of income. See Also: SLIDE SHOW: 12 Ways to Go Broke in Retirement

The 80% rule is "imprecise and encourages people to save an amount of money that may not be needed for spending in retirement," says Michael Finke, professor of personal financial planning at Texas Tech University. What's more, he says, it "may create a sense of anxiety among workers whose current savings may seem woefully inadequate."

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