(Money Magazine) -- Question: My wife and I are both 55 and plan to retire in two years.
Our combined yearly income is approximately $240,000, and I keep reading that you need 70 percent to 80 percent of your pre-retirement income when you retire.
I may be naive, but I don't think that's true for us. What do you think?
The Mole's Answer: You're referring to an old rule of thumb that financial planners toss around quite a bit, and may I suggest you pretend you never heard it.
Clients often come to me with this same question, and I can't answer it without knowing how much they are spending. Some clients making $100,000 per year are only spending $50,000, while others are earning $110,000 and getting further in debt.
So you should really ask, What percent of my current annual expenditures should I expect to spend in retirement?
The best place to start is determining how much you are spending in pre-retirement. If you're not doing advanced tracking with a software program, then at least have a look at your checking account.
Your current annual expenditures amount to all your income (take-home pay, dividends, etc...) less what you put into savings.
Then you should think about what adjustments you'll make in retirement. Here are just a few life changes that might dramatically reduce expenditures:
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