It’s one of the toughest financial questions to answer: How much do you need to save for retirement? Save too little and you might find yourself working at McDonald's during “retirement” — or living with your son-in-law. Save too much, though, and you’ll end up sacrificing the good life today for an uncertain tomorrow.
If you listen to many financial planners (or trust most online retirement calculators), you need to replace 70% or more of your pre-retirement income in order to maintain your current lifestyle. But basing your retirement needs on income is like basing your fuel needs on the size of your car’s gas tank. What really matters is how far you have to go and what kind of gas mileage you get.
To get a better idea of how much you should save, base your projections on your current spending patterns. Your spending reflects your lifestyle; your income doesn’t.