On This Episode
Just like technology changes and becomes outdated, so does some retirement planning strategies. Let’s look at five financial strategies that have become obsolete.
On today’s Saving With Silverman podcast, Mark looks at five financial strategies that have become obsolete over the years.
The 4% rule
An old rule of thumb was you could take 4% out of your investment portfolio every year and not worry about running out of money.
“That rule has been debunked actually a couple different times. That number is closer to 2 or 3 percent,” said Mark. “It also depends on when you’re retiring, your life expectancy.”
The 10/5/3 rule
The old rule said you should expect a 10% return from stocks, 5% return on bonds and 3% return on cash. But those are some obsolete numbers, and we know they are not accurate in today’s economy.
“That rule definitely doesn't work,” said Mark. “Cash, it’s been a long time since we’ve seen a 3% return on that.”
Move money from stocks to bonds as you get older
This general principal can apply, because people do tend to become more conservative as they get older. But you shouldn’t solely use it as a gauge for asset allocation.
$1 million retirement target
Should everyone save $1 million for retirement? It’s important to remember that everybody’s situation is different. You need to ask yourself some questions: What’s your age? How long will you be retired? What are you spending? What’s your risk tolerance?
You’ll need less money in retirement
It’s often said that you’ll need 70 to 80 percent of your working income in retirement. Where that holds true is if you had a mortgage and paid it off. So you’re still spending the same but you don't have a mortgage anymore.
It just depends on what you’re going to do in retirement. You might actually require more money. But most people spend about the same amount of money in retirement as they did while working.
Listen to the entire episode or click on the timestamps below to skip to a particular segment.
Cash, it’s been a long time since we’ve seen a 3% return on that.
- Mark Silverman, CFP®
Let’s get rolling with the first episode and you can use the timestamps below to skip around to specific topics.
1:21 - The 4% rule
2:04 - The 10/5/3 rule
2:49 - Move money from stocks to bonds as you get older
4:15 - $1 million retirement target
5:14 - You’ll need less money in retirement
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