In today's world of medical advancements, healthier lifestyles and longer lifespans, many people nearing retirement wonder if they will outlive their savings.

There's no shortage of advice about targeting a retirement income of at least 70 per cent of your pre-retirement income or having a cushion of a million dollars heading into your golden years. While both are enviable sums, are these hefty figures realistic or necessary for many retirees?

When we posed the question to three experienced financial professionals, it sparked a lively conversation that resulted in some tangible advice that goes beyond the usual, sock-it-away philosophy that leaves many people wondering where they're at.

The Rule of $20
For investors who appreciate yardsticks, Russell Investments Canada's new Retirement Rule of $20 is a clear one. The Rule of $20 states that every $20 of retirement savings generates $1 of retirement income per year, adjusted for inflation. Therefore, if you take $400,000 in registered savings and divide by 20, you would generate an income stream of about $20,000 for a period of over 30 years.

While the Rule of $20 provides a helpful visual, Fred Pinto, CEO, OceanRock Investments Inc., suggests focusing on three key factors in retirement before looking at the numbers.

"People talk about million-dollar portfolios, they talk about 80 per cent replacement issues, but I think there is a little bit of fear mongering taking place. What we would say is be pragmatic and really start with your needs first," says Pinto.

Three buckets of expenses
Break down your needs into three categories or buckets: essential expenses, lifestyle expenses, and then, if you're fortunate to have money left over, estate wishes.

The first and most important expenses that people should cover off are basic essentials, says Pinto. While essentials include things like food, housing and clothing, they include personal choices as well. "My in-laws consider visiting my wife and me and the kids an essential expense," says Pinto, so twice yearly trips from Calgary, Alta., to Toronto are factored into their retirement expenses.

Another concern, greatly heightened by the volatile markets, is what combination of equities and fixed income will sustain investors in their retirement years. "The Rule of $20 and all of our retirement research has led to the right asset mix of putting 35 per cent into equity and 65 per cent into fixed income," says Pinto.

Warren Baldwin, regional vice-president at Toronto-based T.E. Financial Consultants Ltd., agrees that focusing on lifestyle and choices, not lump sum numbers, is the first step in retirement planning. "My main beef with a lot of what the industry has to say is when they jump on the bandwagon and say you need 80 per cent of your pre-retirement income in retirement," says Baldwin. "In a word, I think that's rubbish, because you don't."