Yes, it is flawed, mainly because of the variability of the expenditure side. If you are still paying rent, or paying a 40-year mortgage, 65-70% is not a bad rule of thumb. But most homeowners aim to retire mortgage-free, with their kids no longer financially dependent on them. If they manage this, then they don't need 70% to maintain the same life style.
It might be more accurate to say that the 70% rule is based on a statistically average wage earner, with statistically average living costs. The principle is that after retirement you no longer have to pay:
CPP, Pension or RRSP Contributions; EI; Union Dues; or other work-related deductions and costs. These, together with lowering your taxes, mean that a 70% gross pension income will net about the same net take-home pay.
It might be more accurate to say that the 70% rule is based on a statistically average wage earner, with statistically average living costs. The principle is that after retirement you no longer have to pay:
CPP, Pension or RRSP Contributions; EI; Union Dues; or other work-related deductions and costs. These, together with lowering your taxes, mean that a 70% gross pension income will net about the same net take-home pay.
