'Do I really need 100% of my pre-retirement income?'

(Money magazine) -- It seems the new mantra is that you need 100% or more of your pre-retirement income to live comfortably in retirement. But shouldn't you be able to get by with much less considering you no longer need to save for retirement and you may no longer have a mortgage? -- David Kolkebeck, Readsboro, Vt.

I agree that the "replacement ratio," or percentage of pre-retirement income advisers claim one needs to live well in retirement, seems to have crept up over the years.

When I started writing for MONEY magazine in the 1980s, people routinely referred to the "70% rule" when discussing the percentage of pre-retirement income one ought to shoot for.

Soon 70% expanded to 80% or 90%, and before long, some people began suggesting that 100% was a more realistic benchmark. A few years ago, one retirement research firm even came up with a figure of 126%.

Conspiracy theorists see something sinister in this retirement income inflation: Ah, those sly investment firms are pushing the replacement ratio higher, so we have to invest more money in mutual funds and the like, which allows them to collect bigger fees. But I think something less ominous is at work: uncertainty.

The simple fact is that it's tough to know exactly how much income you'll actually need in retirement. A recent study by the Employee Benefit Research Institute found that household expenditures decline later in life, dropping roughly by a third between ages 65 and 85.

But that doesn't mean your spending will follow that trajectory. Your outlays in retirement can vary widely depending on a number of factors, including: how closely you want your retirement lifestyle to mirror the way you lived during your career; how much you've saved for retirement and your kids' college expenses; whether you retire with a mortgage or other debt; whether you have retiree medical coverage from your company or will rely solely on Medicare; and how much you earned during your career.

So rather than viewing a replacement percentage as something you can pinpoint precisely, think about it as a very general guideline that can help you estimate how much you ought to be saving during your career and to gauge whether you're making progress on the retirement planning front.

As a baseline, I'd start with a replacement ratio of 70% or 75%. That should reflect the fact that many of the expenditures you face during your career -- saving for retirement, work-related expenses, the cost of raising kids -- won't be around after you retire.

Most people's tax bills also drop in retirement, although the higher your income is, the less you'll likely save on taxes post-career.

Once you're saving enough to meet that baseline, you may want to consider raising your target percentage a bit -- say, to 80% or 90%.

Why? Simple prudence. Studies show that people have a tendency to underestimate how much they'll spend after calling it a career. Besides, a lot can go awry on the way to retirement: layoffs can interrupt savings plans, market crashes can slash the value of retirement accounts, declining health can drive up medical expenses. It's always nice to have a cushion if you can manage it.

If you expect to live large, shoot for an even higher replacement percentage. But as a practical matter, most people simply can't afford to save enough to replace 90% to 100% of their pre-retirement income and also meet the normal everyday expenses of feeding, clothing and housing a family, not to mention buying a car, paying for insurance, etc.

And even if you could force yourself to sock away enough to fund a lavish retirement, would that make sense if doing so required you and your family to live like ascetics today?

Once you're within, say, five to 10 years of retirement, you'll want to switch from looking at how much income you'll need to estimating the actual expenses you'll have to cover in retirement.

The best way to do that is to create a retirement budget, preferably using an interactive budgeting worksheet like the one in Fidelity's Retirement Income Planner.

You won't be able to predict your expenses with total precision either, of course. But by giving serious thought to how you might actually live after you leave work and updating your budget each year as you approach retirement, you should be able to get a decent sense of how much income you'll actually require once you retire -- and then gauge whether you're on track to achieve it given how much you're saving and how much you've already stashed away.