One time-honored rule of thumb suggests that should save 10% of your income for retirement. But that percentage might be too high or too low for many people saving for retirement, according to a new study.

Indeed, your saving rate should be based on your household income, what probability of success you want, and the age at which you start saving according to Dimensional Fund Advisors, a mutual fund firm based in Austin, Texas.

“It is important to note that simple rules of thumb do not work for many people,” wrote the authors of the paper, Massi De Santis, a senior research associate at DFA, and Marlena Lee, a vice president on DFA’s research team. “When planning for retirement, income uncertainty can be substantial, so a one-size-fits-all solution is unlikely to work.”

Why do investors take risks?

In an interview, Lee said the saving rate that works well on average does not work well for people with steep income trajectories or high income variation over their working life—the very people who may need to rely more on personal savings.

What does work, Lee and De Santis wrote, is this: A dynamic approach to saving that accommodates changing retirement needs and savings capacity.

In their research, Lee and De Santis ran thousands of simulations in hopes of finding savings rates for different household income levels that would produce successful outcomes, a successful outcome being one that produces a targeted income replacement rate with a high degree of confidence.

How much to replace?

According to Lee, the first step to determine an appropriate saving rate is to estimate how much retirement spending will be financed with retirement savings. And while this estimate is specific to each individual, general guidelines about reasonable replacement rates are available, she said.

And those guidelines are these: You should aim to replace in retirement:

82% of your gross preretirement household income if you have household income of less than $25,870, 59% of which will come from Social Security and 23% of which will come from savings;

72% of your gross preretirement household income if you have household income of $25,870 to $49,940, 38% of which will come from Social Security and 34% of which will come from savings;

62% of your gross preretirement household income if you have household income of $49,941 to $86,881, 31% of which will come from Social Security and 31% of which will come from savings; and

58% of your gross preretirement household income if you have household income of more than $86,882, 21% of which will come from Social Security and 37% of which will come from savings.

Calculate a saving rate

Lee noted that a required saving rate depends on many things, such as income paths, portfolio returns, and assumed withdrawal rates. But if you assume a few things, such as the ages someone starts saving (25) and retires (66) and you assume that savings are invested in global equities and fixed income in such a way that the equity exposure equals 120 (minus) one’s age as a percent of the portfolio, you can determine what saving rate will yield a 40% replacement rate for 95% success probability, 90% and 50%.

Safety is costly

Among their discoveries, Lee and De Santis found that if you want to replace 40% of your preretirement income with a 95% probability, households would need to save 16.6% of their salary from age 25 to 65. But if they want a 90% success rate (that is there’s only a 10% chance of their being a shortfall in retirement), the savings rate needed is 13.2%, and for a 50 success rate, it would substantially lower (5.2%). In other words, the higher the probability of success that you might want, the more you need to save.

Starting early matters

Lee and De Santis also determined how much you might need to save to replace 40% of your preretirement income depends in large part on the age at which you start saving.

So, for instance, someone who wants a 90% success rate and who starts at age 35 needs to save 19.2%; those who start saving at age 30 need to save 15.4%; and those who start saving at age 25 need only save 13.2%. And so, though it might be obvious, Lee and De Santis duly noted in their paper that “starting early and saving consistently should be a priority when planning for retirement.”

Income matters, too

Lee and De Santis say retirement savers need to reconsider their saving rate if they expect high-income growth over the course of their career. “For individuals in the upper end of the income distribution at 65, for whom income growth is greater than expected, relatively low savings at the beginning of their career will not be enough to replace the high income earned as they neared retirement,” they noted.

So, one way to up the odds of having successful retirement—particularly for those who experience higher income growth—is to change your saving rate as your income changes, Lee said.

So, for example, a 25-year-old making $48,000 can start by saving 6.6% for a 90% probability of success, and gradually increase savings through time; to 8.8% as he or she crosses the $50,000 threshold, 11% as he or she crosses $60,000, and so on.

Savings rates needed to reach a 40% replacement rate by income range and success probability:

Income Range ($, Low-High) Success Probability 95% 90% 50% Less than 25,000 2.8% 2.2% 0.9% 25,001-40,000 5.7% 4.4% 1.7% 40,001-50,000 8.5% 6.6% 2.6% 50,001-60,000 11.3% 8.8% 3.5% 60,001-70,000 14.2% 11.0% 4.4% 70,001-85,000 17.0% 13.2% 5.2% 85,001-100,000 19.8% 15.4% 6.1% 100,001-130,000 22.6% 17.6% 7.0% 130,001-180,000 30.6% 23.7% 9.4% More than 180,000 34.0% 26.4% 10.5%

Results based on Monte Carlo simulations of income profiles, stock returns, and bond returns for 100,000 households. Income profiles calibrated using PSID data and census data. Stock and bond returns bootstrapped using historical returns. Source: Dimensional Fund Advisors.

At the extremes, the paper suggests that those with household income of $25,000 or less need only save 2.2% to have a 90% probability chance of replacing 40% of their preretirement income in retirement from savings, while those with household income of more than $180,000 need to save 26.4%, call it 13 times as much as those earning $25,000 or less.

“The good news is that saving rates do not need to be as high as in (table) throughout one’s working life, but they do need to be high as income increases and when the capacity to save is also higher’” Lee and De Santis wrote.

Are you on track?

To be sure, it’s likely that you deviate from your savings plan over the course of your life. Given that, Lee said it’s a good idea to evaluate your progress along the way and make changes if appropriate.

One way to check your progress is divide your accumulated assets by your current income, or what’s called the asset-income multiple. “The greater this multiple is, the greater the chance to achieve a given target replacement rate,” Lee and De Santis wrote.

Given your asset-income multiple, you can calculate whether you need to save more or less to meet your desired replacement rate. So, for instance, if the asset-income multiple is too low, you’d have to save more, or adjust downward your goals, or retire later, Lee said. And if your asset-income multiple is very high, you could trim back on your savings to target your given success probability.

How to do an assets-to-income check:

This is for 30% replacement with 90% probability, and assuming a 4.5% withdrawal rate. The values by age are:

Age Asset/Income 25 0 35 0.75 45 3.125 55 6 65 6.75

So, for example, a 65-year-old targeting a 30% replacement with a 90% probability of success would need to have $6.75 per 30 cents of annual income in retirement, or $22.50 in total assets to support $1 an annual income in annual income. If they had less than $6.75 saved per 30 cents of annual income in retirement they might have to adjust downward their goals or work longer. By contrast, if they had more than that multiple, they could retire knowing that they have at least a 90% chance of retiring in comfort.

Bottom line

So what’s the bottom line when it comes to saving for retirement? Well, according to Lee and De Santis it’s this:

Start early, even at low saving rates. “Missed years have a non-trivial impact on future saving rates, and the early buildup of assets can offer flexibility later in life,” Lee and De Santis wrote.

Save consistently over time. Plus, increase savings with income, particularly if you are uncertain about future income growth.

Keep track of performance by monitoring accumulated savings and savings rates as income changes, and make changes as needed. And don’t forget to take maximum advantage of employer contributions.

Read How Much Should I Save for Retirement? Read also the Retirement Income Equation.