Outdated Retirement Advice To Throw Out the Window
Written by
G. Brian Davis
Edited by
Zuri Anderson
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People use pithy rules of thumb for retirement because they’re easy to communicate. But that doesn’t make these rules good financial advice.
As you plan out your own retirement investments, watch out for these outdated but oft-repeated “rules.” You’ll also regret not making these retirement moves if you’re entering your golden years in 2026.
The Rule of 100
Financial advisors sometimes tell their clients to subtract their age from 100 and set that as their stock allocation.
“‘Put your age in bonds’ had its place decades ago, but today we live in a world where people are living longer and retiring more actively,” notes financial planner Michael Harris of Emory Wealth.
That rule may have worked when Treasury bonds paid 8% interest, but falls apart when they pay 2% to 4%. With Americans living longer than they did in the 20th Century, they need the higher returns offered by equities, later into their adulthood.
The 60/40 Retirement Portfolio
Even 40% of your portfolio in bonds may be too much.
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 tested that portfolio and found that sure enough, it outperformed the 60/40 portfolio with a miniscule failure rate of 2.3%.
“Inflation is a far more insidious retirement killer than volatility ever could be,” said financial planner Eric Croak of Croak Capital. “Safe money isn’t what doesn’t move, it’s what outpaces risk on a predictable basis.”
The 4% Rule
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.
Decades later, he himself refuted it in an interview with Afford Anything, 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.
Pay Off All Debt Before Retiring
Just because you should pay off your student loans and credit card balances before retirement doesn’t mean you must pay off your mortgage.
Real estate investor Austin Glanzer of 717HomeBuyers.com knows debt well — he uses it to scale his portfolio. And each property he buys adds more monthly net income.
“Bad debt is dangerous, but the advice to ‘avoid debt at all costs’ keeps a lot of people stuck,” Glanzer said.
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.
Assume 80% Spending in Retirement
Some financial planners tell their clients to plan for 80% of their current living expenses as their retirement budget.
“Sure, you may spend less on work clothes and gas for your commute, but you’ll also likely spend more on travel, entertainment and healthcare,” explains professional investor Oren Sofrin of Eagle Cash Buyers.
Today’s retirees don’t necessarily want to sit on the couch watching TV all day. An active lifestyle costs more, so budget accordingly.
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