I have often heard that people should be saving 10 percent, on average, of their earnings for retirement. But is the 10 percent rule per household or per individual? We are both 45 years old. I have $68,000 in an IRA and $15,000 in my company 401(k). My wife has $88,000 in her 401(k), and we are both contributing 6 percent to each 401(k). — D.C., Dallas
Most of the rules of thumb for retirement savings planning are wrong because they fail to take into account the connection between savings and retirement income. Here is an extreme illustration: It doesn’t make sense to save 40 percent of your income today with the goal of replacing 80 percent of your income in a distant tomorrow. They also don’t take into account the demonstrated reality that household spending peaks between ages 45 and 55. After that, it slowly declines.
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