SmartMoney Blogs

A blog about living in and planning for retirement

Retirement Income: Are You Getting It Wrong?


How much of your current income will you need in retirement? A new study by behavioral economist Dan Ariely offers evidence that we’re asking this crucial question the wrong way.

Ariely’s study first asked people how much of their final salary they thought they’d need in retirement. Most people said 75% — but they also said they’d heard that rule of thumb from the financial industry. Next, Ariely and his team approached the question in a different way, asking people what kind of life they wanted to lead in retirement, and what kinds of things they planned to do. To fund the lifestyle they wanted, they calculated, people would need 135% of their final salary.

“If you think about it,” Ariely writes, “this should not be very surprising: If you add 8 hours (or more) of free time to someone’s day, they will probably not want to spend this extra time by going for long walks on the beach and watching TV – instead they may want to engage in activities that cost money.”

The lesson: A better way to posit the retirement income question is to think about how you’ll really spend your time and what those activities will cost.  To figure out what you might spend in retirement, check out SmartMoney’s Retirement Planner here.

Ariely is a professor at Duke University and the author of “Predictably Irrational” and “The Upside of Irrationality”; SmartMoney profiled him and his research on behavioral finance earlier this year. For more updates on his work, check out his blog.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.