You have probably been told from the time you have started working that it is never to early to save for retirement. With all the options available, finding a place to put money for the future is easy. Is too much being put away though?

The 80 Percent Rule

The 80 percent rule says that between social security, retirement savings and other retirement income you should be able to replace 70 to 80 percent of your pre-retirement income. If you began saving late in life your investments may have been as high as 50% of your income. What this means is when retirement is finally reached, the 80 percent rule is much higher than what you were actually spending in the first place. This means there needs to be an increase in your spending that may not be necessary.

Achieving a Balance in Spending Levels

Unless there is a reason that you foresee needing large amounts of money in retirement, a more balanced strategy would be to look at spending, not gross incomes. Some experts say that if you look at planning to spend the same amount that you do before and after retirement, the amounts that you need to save are lower than they would be shooting for the 80 percent rule.

As always, planning for the future is an individual enterprise. If you need to consult an expert for legal advice on retirement planning, contact Stano Law group today!