Saving for retirement is important but if you follow bad advice, you could end up setting yourself back. Here are three dangerous guidelines that you should probably ignore:
Follow the 4% Rule
This rule says that if you begin with 4% of your savings balance in your first year of retirement and then adjust subsequent withdrawals for inflation, your nest egg should last thirty years. But the 4% rule makes a lot of assumptions about your mix of stocks and bond yields and how long you may need your retirement money to last. While you can use the 4% rule as a starting point when determining what savings withdrawal rate to establish, you shouldn’t automatically assume that it is the right rate for you.
Dump your stocks
Seniors are generally advised to steer towards safer, conservative investments for retirement, like bonds. While that’s a smart thing to do to some degree, you should still aim to have at least 30% of your portfolio in stocks during retirement. Stocks can play a pivotal role in generating retirement income for you, so it wouldn’t be wise to dump them completely.
Assume your expenses will decline dramatically
Seniors are often told that their living cost will drop substantially in retirement. But in reality, that may not be true. Rather than making assumptions, take the time to think about where you will live in retirement and what your lifestyle will look like. From there, you will be able to run some numbers to get a better sense of how much to save.