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So if you earn $100,000 the year you retire, we estimate you will need $85,000 during the first year of retirement. For each subsequent year, we increase your income need by 2.3% to keep up with inflation.
The so-called income replacement rate concept is often the first step in estimating a retirement savings plan. A 2012 Aon Hewett study suggested that retirees should try to replace 85% of their income during the first year of retirement. Many advisors take an 80% or 85% number for granted. If you earned $100,000 right before retirement, youâll need an income of $85,000 to avoid cutting back during your golden years.