Many of us struggle with how much cash in the bank we will need to be able to comfortably retire. Each person’s quality of life is defined so differently, that a simple mathematical equation often does not work perfectly. A recent study by Dimensional Fund Advisors provides a unique sliding scale approach that is worth evaluating.

Estimate how much annual income you will need in retirement, subtract projected Social Security and pension income, and then aim to accumulate roughly 20 to 25 times the amount that is left by retirement. That is a conservative way to insure that you can pull 4 percent a year (plus an inflation adjuster) out of your portfolio every year and not run out of money over a long retirement.

Traditional retirement studies indicate you will need 75%-80% of your income, so many people either never retire or give up trying to save.

The new research finds that the more you make, the lower your replacement rate needs to be, because high working-year taxes that disappear in retirement. The less you make, the more of it Social Security will cover (if you trust there will be money available for you).

Those who make under $26,000 need as much as 82% of their working income to live comfortably in retirement. Social Security will replace the bulk of that, leaving that group to replace 23% of their final salaries – or about $7,300 a year from savings – without any future belt-tightening.

Those earning $50,000 to $87,000 only need 62% of their last salary to live on and Social Security will supply half of it.

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