When it comes to retirement plans, what’s best for most people may not be best for you. You may sometimes need to go against traditional advice instead to create your optimal retirement plan. Consider how these common tips could affect you before deciding whether to incorporate them into your retirement plan.
Retirement plan advice should be unique to your needs. You are not like anyone else.
Rethink Retirement Advice to Set an Annual Income Amount
Experts traditionally say that you will need at least 70 percent of your preretirement income – or 90 percent or more if your earnings are lower – to maintain your standard of living, according to advice on the top ways to plan for retirement from the U.S. Department of Labor.
But those percentages could vary for your retirement plan. In fact, many people spend more since they have additional leisure time. Your needs could change if you or a loved in gets ill and incurs unanticipated care expenses, for example. You may also under estimate inflation, which could erode your buying power.
Rethink Retirement Advice to Limit Post-Retirement Withdrawals to 4 Percent
Researchers in the 1990s prompted the formulation of “the 4 percent rule,” which recommends that retirees limit annual withdrawals from their retirement plans to that percentage. But retirement advisors no longer hold that rule sacred, CNN/Money reported in a story on how to avoid outliving your retirement savings.
Advisors now say you may need to limit it to a smaller percentage to overcome lower projected investment returns, CNN/Money reports. You could also decide to spend a greater percentage early in retirement then cut back.
Rethink Retirement Advice to Pay Off Your Mortgage
Living debt free is often the right approach but not always. Paying down a low-interest mortgage instead of investing in higher yielding assets could cost you significantly in the long-term, according to a Bankrate story on ill-conceived pieces of retirement advice.
Setting aside the emotional return of owning your home outright and focusing on the financial ramifications will help you decide what is best for your retirement plan.
Reverse mortgages are another spin on debt that might turn out to be a good solution for you.
Paying off your mortgage may not be in your best interest.
Rethink Retirement Advice to Invest More Conservatively as You Age
You don’t want to risk losing your savings due to market drops as you near retirement, but you cannot pull back too soon either. With people living longer the traditional advice of allocating assets by age no longer applies, according to a U.S. News and World Report on big retirement blunders. “Instead, even retired investors need enough growth in their funds to keep up with inflation and stretch money over what could potentially be a 30-year retirement,” the magazine reported.
Investing based on your age may not make the most sense.
Rethink Retirement Advice to Keep Working
Working longer has become a common element in retirement plans. Labor force participation at ages 60 and above was noticeably higher in 2013 than in 1983, researchers at the Center for Retirement Research at Boston College found in studying the average retirement age, which they determined was 64 for men and 62 for women. Though this may work in theory, it is not always possible. Illness or injury could impair your ability to work, as could changes in employment conditions or your personal circumstances.
Traditional retirement planning advice can be helpful. But determine whether it makes sense for you before incorporating it into your retirement plan.
How to Find Retirement Plan Advice That Works
The best way to plan your retirement is to work through all of the details and create a plan that is very specific to you. And then have back up plans in case something changes.
Some retirement calculators enable you to control the details. The NewRetirement Retirement Planner is more detailed than most and it shows you pessimistic and optimistic projections that give you a more realistic range of how prepared for retirement you might be. You also get personalized recommendations — not generalized advice.
