People use pithy rules of thumb for retirement because they\u2019re easy to communicate. But that doesn\u2019t make these rules good financial advice.<\/p>\n
As you plan out your own retirement investments<\/a>, watch out for these outdated but oft-repeated \u201crules.\u201d\u00a0You\u2019ll also regret not making these retirement moves if you\u2019re entering your golden years in 2026<\/a>.<\/p>\n Financial advisors sometimes tell their clients to subtract their age from 100 and set that as their stock allocation.<\/p>\n \u201c\u2018Put your age in bonds\u2019 had its place decades ago, but today we live in a world where people are living longer and retiring more actively,\u201d notes financial planner Michael Harris of Emory Wealth<\/a>.<\/p>\n That rule may have worked when Treasury bonds paid 8% interest, but falls apart when they pay 2% to 4%. With Americans living longer<\/a> than they did in the 20th Century, they need the higher returns offered by equities, later into their adulthood.<\/p>\n Be Aware: 64% of Americans Aren\u2019t Prepared For Retirement \u2014 and 48% Don\u2019t Care<\/a><\/p>\n Trending Now: 5 Clever Ways Retirees Are Earning Up To $1K per Month From Home<\/a><\/p>\n Even 40% of your portfolio in bonds may be too much.<\/p>\n In his will, Warren Buffett famously ordered his trustee to put 90% of his assets in an index fund mirroring the S&P 500, and the other 10% in short-term government bonds. Finance professor Javier Estrada of the IESE Business School<\/a> tested that portfolio and found that sure enough, it outperformed the 60\/40 portfolio with a miniscule failure rate of 2.3%.<\/p>\n \u201cInflation is a far more insidious retirement killer<\/a> than volatility ever could be,\u201d said financial planner Eric Croak of Croak Capital<\/a>. \u201cSafe money isn\u2019t what doesn\u2019t move, it\u2019s what outpaces risk on a predictable basis.\u201d<\/p>\n In the 1990s, Bill Bengen popularized the 4% Rule: Withdraw 4% of your nest egg in the first year of your retirement, and then adjust the dollar amount upward by the rate of inflation each year after that.<\/p>\n Decades later, he himself refuted it<\/a> in an interview with Afford Anything<\/a>, arguing that you can withdraw 5% if you shift money out of stocks just before you retire and then move it back into stocks after the dangerous first few years of retirement.<\/p>\n Just because you should pay off your student loans and credit card balances before retirement doesn\u2019t mean you must pay off your mortgage<\/a>.<\/p>\n Real estate investor Austin Glanzer of 717HomeBuyers.com<\/a> knows debt well \u2014 he uses it to scale his portfolio. And each property he buys adds more monthly net income.<\/p>\n \u201cBad debt is dangerous, but the advice to \u2018avoid debt at all costs\u2019 keeps a lot of people stuck,\u201d Glanzer said.<\/p>\n If you pay 2.5% interest on your home mortgage, you could pay that off to escape it. Or you could invest in virtually risk-free Treasury bonds at 4%, which says nothing of investing in the S&P 500 for double-digit historical returns.<\/p>\n Some financial planners tell their clients to plan for 80% of their current living expenses<\/a> as their retirement budget.<\/p>\n \u201cSure, you may spend less on work clothes and gas for your commute, but you\u2019ll also likely spend more on travel, entertainment and healthcare,\u201d explains professional investor Oren Sofrin of Eagle Cash Buyers<\/a>.<\/p>\n Today\u2019s retirees don\u2019t necessarily want to sit on the couch watching TV all day. An active lifestyle costs more, so budget accordingly.<\/p>\n More From GOBankingRates<\/p>\n This article originally appeared on GOBankingRates.com<\/a>: Outdated Retirement Advice To Throw Out the Window<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"People use pithy rules of thumb for retirement because they\u2019re easy to communicate. But that doesn\u2019t make these…\n","protected":false},"author":2,"featured_media":316793,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,40583,86584,147,530,1666,196993],"class_list":{"0":"post-410373","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-financial-advice","10":"tag-financial-planner","11":"tag-personal-finance","12":"tag-personalfinance","13":"tag-retirement","14":"tag-treasury-bonds"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/410373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=410373"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/410373\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/316793"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=410373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=410373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=410373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}