Ep 40: Should You Follow These Popular Retirement Rules of Thumb?

You’ve most likely heard plenty of “rules” you’re supposed to follow to retire successfully. Some of these rules are stated so confidently, you’d be crazy not to immediately accept them as fact. But we don’t mind the threat of being called crazy, so let’s dive into some of the most popular retirement “rules of thumb” to see if they truly lead us down the path of good financial guidance or run a chance of leading us astray.
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Show Notes For This Episode

You’ve most likely heard plenty of “rules” you’re supposed to follow to retire successfully. Some of these rules are stated so confidently, you’d be crazy not to immediately accept them as fact. But we don’t mind the threat of being called crazy, so let’s dive into some of the most popular retirement “rules of thumb” to see if they truly lead us down the path of good financial guidance or run a chance of leading us astray.

On today’s episode, we’ll cover six of the most popular rules of thumb in retirement planning. What you’ll quickly learn is that many of these “rules” are problematic. They’re either too vague, outdated, or just flat out wrong in several instances.

Here’s a breakdown of some of the rules we’ll cover and timestamps to help you zero in on ones that might interest you the most. Have you been following some of these rules yourself? This episode is a great chance to get educated on which rules of thumb are worth following, and which ones aren’t, in retirement planning.

 

The Rule of 100. This one is all about risk. 100 – your age = the amount of risk you should have in your portfolio. This rule unfortunately is just too simplistic. 1:33

The 75% rule. The rule states that once you retire, you’ll need about 75% as much income as you earned while working. Note: some call this the 80% rule. 3:55

The Rule of 72. This rule is a shortcut to figure out how fast your money will double. Luckily this one isn’t an opinion, it’s just math. So the rule holds true. Michael tells you how it works. 7:40

Rule of 5. This one says, on average, we experience a bear market every five years. Michael says it’s in the ballpark of being right, but it’s really misleading. 9:39

Rule of 10. Experts have said you should have 10 times your salary saved for retirement by age 67. Michael says this one is ridiculous! 13:25

4% Rule. This is the most popular rule. It’s based off of safe withdrawal income planning. Most pre-retirees have heard of the 4% rule and used to be widely considered as a great way to draw down money in your portfolio with confidence that you probably won’t run out of money. But does this rule still hold true in 2022? 15:45

 

If you have any questions about how you can better prepare for your retirement future, don’t hesitate to reach out to Michael Schulte for help. He’s a Financial Advisor and Certified Business Exit Planner at WestPac Wealth Partners. His daily mission is to help families and business owners make smart financial decisions so they can live on their own terms the rest of their lives, regardless of what life events and opportunities come their way. Call Michael at 702-767-4897 with any of your questions or email michael.schulte@westpacwealth.com.

 

A lot of times people think in terms of their retirement accounts in a vacuum. Even if they understand their risks, they only consider the risk they have in a specific account when all the money and equity they have as their net worth has some type of risk attached to it that we need to consider.”

– Michael Schulte

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Copyright 2020 Saving The American Dream Podcast. Michael Schulte is an investment advisor representative and certified exit planner with WestPac Wealth Partners, located at 330 South Center Street, Suite 344, Casper, Wyoming 82601. The podcast is for informational purposes only. Individual risks and investment objectives must be reviewed prior to making any recommendations. Podcasts are for informational purposes only. Any guest speakers and their firms are not affiliated with or endorsed by PAS, Guardian, or WestPac Wealth Partners and opinions stated are their own. Guardian, its subsidiaries, agents, and employees do not provide tax, legal or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Michael is a Registered and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5 Centerpointe Dr Suite 150, Lake Oswego, OR 97035, 503-207-4550. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners is not an affiliate or subsidiary of PAS or Guardian. 2022-140225 Exp 7/24