The easiest way IMO is to project out what your income needs would be. Most places I've seen say that you need 80-90% of your current income in retirement (based on whether you have a mortgage or want to travel, etc..) Then your income times 25 would be your retirement need to last approx 30 years. https://www.fool.com/retirement/how-much-do-i-need/ If you are X years from retirement, you can project your current 80-90% income by the typical 2-3% average inflation and use that as your target. Of course, there are many special circumstances that may factor in. Your retirement income needs might drop considerably from current if you have kids that move out of the house. Or pay off your mortgage. Or you may have kids still living with you... The idea is to project out your potential future annual income needs. Do a best case and worst case scenario and see what variations might be there. I did this for myself a year ago and feel much better about my plan to retire at 59.5. Plus, I know what my variables are and can work on them to mitigate the "worst case" scenarios (e.g. pay off my mortgage sooner). 80-90% of current income would allow for a pretty decent upgrade in lifestyle for most, I would think. You're probably paying less taxes at that point if you did a little planning. You are no longer forced to save a significant portion of your income at that point (probably 10-30% for many). There's a decent chance you'll no longer have a mortgage payment, at least through much of retirement. Right now my wife and I have nearly 50% of our income going to retirement/savings and our mortgage payment. Those are all expenses that will be gone at retirement with some planning. I completely agree with you about the 80 or 90 percent being an over-estimate as like you said we put 33 percent into retirement but I think people are doing this to be safe with inflation over the long-term. I use the Personal Capital retirement calculator and I tell you what if you even move inflation up half a tick from the 3.5 norm to 4% your net worth craters over the next 40 years. I am also going to be mortgage free when I retire but when I look at the numbers the actual mortgage we carry is probably around than half the cost of living in a house (obviously everyone's numbers will be different depending on price paid and interest rate etc.) and those numbers increase unlike mortgage payments. To live in our mid-size house and to pay the insurance, property taxes, heat, electric, garbage, water and everything you HAVE to pay (not counting things like internet and cable) still costs over a grand a month. I basically keep track of every penny we spend and it comes out around 4k a month with mortgage over the last 3 year sand I have entered into the calculator anticipated spending of 5k (without mortgage) just to be safe and have the inflation set at 4 percent and then I start reducing our spending at around the age of 75 by 1 percent a year. I find the calculator to be fascinating to play with all the scenarios. I'm planning on retiring in 7 years at 55 and it's pretty scary with (hopefully) that much time left to live (especially since my wife will be 49) and basically cutting off any major sources of income.
