Retirement Planning Rules of Thumb

Today’s Prep:

While financial planning has a lot of numbers involved, here are a few letters and abbreviations you should know, too. Eric explains several common financial abbreviations.

(Click the featured times below to jump forward in the episode)

Equipping Points:

You may have heard of at least one if not all of these financial rules, but should you follow them? What do they really mean? On today’s episode of the podcast, we talk through four common rules of thumb when it comes to financial planning and what Eric advises about them.

The Rule of 100 is a planning rule that comes to how much risk you should have in your portfolio. If you subtract your age from 100, the rule goes that’s the amount you have leftover is how much you should have in riskier investments like stocks. But before you assume this rule always applies, it’s important to consider your unique situation. This might be a good conversation starter though with your financial advisor.

The 75 percent rule is a rule a lot of planners use to consider how much of your income you’ll need in retirement. While you’re working, things come out of your check, such as retirement contributions, Medicare, and Social Security. The amount of money you need in retirement might better resemble your net income when working. What does it take for you to live?

The six months savings rule is set to protect you when you’re working in case of job loss or unexpected emergencies. How liquid does this money need to be? Liquidity isn’t only the money in the bank.

What is the 4 percent rule and is it a good one? This was originally designed by a financial advisor, William Bengen, in California in the 1990s. He found that 4 percent should last you about 25 years in retirement. The thing is, will retirement only be 25 years? Morningstar did a review of this to see if it still holds up and at what probability of success. The new rate of withdrawal they came up with was 2.2 percent.

Do you have strategies in place to get you in the income you need and protect it?

Listen to the entire episode or use the timestamps below to skip to a particular rule.

[1:51] – What’s the Rule of 100?

[3:03] – The 75 percent rule means what?

[4:50] – Do you need six months in savings?

[8:01] – Should you use the 4 percent rule?

 

Today’s Takeaway:

Retirement income: Look at what it takes for you to live–go through a budgeting process first–but also just look at what your take-home pay is and try to build it around that.

-Eric Peterson

Related Resources:

Financial Abbreviations, Explained

Should You Follow Dave Ramsey’s Financial Advice?

Financial Fill in the Blank

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

Subscribe To The Podcast:

Apple Podcasts  -  Google Podcasts  -  Spotify  -  Stitcher  -  iHeartRadio  -  TuneIn

Check out some other recent episodes

Mailbag: Should I Move my Mom’s Money into Investments?

May 26, 2022

Where’s the best place for your money to go? Several people are considering where their money should be, so Eric answers three questions from the mailbag for today’s show.

Read More

A Perfect Match: Tennis and Retirement Planning

May 19, 2022

Ready to ace your retirement plans? Let’s talk tennis and see how much it relates to your financial plans on today’s show.

Read More

Mailbag: Money Management Tips For Younger Couples

May 12, 2022

What financial advice does Eric have for younger couples? What can you do to reduce next year’s taxes? Eric answers these questions and more from the mailbag.

Read More

Building a Plan for the Long Haul

May 5, 2022

What do you need to get you through the long haul of life? Eric talks us through what this looks like in your financial plan and how to build it with an eye on a distant horizon.

Read More

What Do You Need to Know About Today’s Inflation?

April 28, 2022

Everywhere you turn there’s a headline about inflation but what do you need to know about what’s going on? Eric weighs in on the recent numbers and what you can do about it.

Read More

Mailbag: Should I Save Elsewhere Besides My 401(k)?

April 21, 2022

What kind of savings do you really need for retirement? Are you working with the right advisor to get you there? Eric answers three questions from listeners.

Read More

Playing the Retirement Game Show

April 14, 2022

Come on down! We talk about our favorite TV game shows and how it relates to our financial plan (and when it should look different).

Read More

Tax Season

April 7, 2022

What do you need to know when it comes to tax planning? Eric outlines the ways a tax strategy can make a big difference in your retirement plan.

Read More

Asking the Wrong Questions

March 31, 2022

What do I really spend? What does it take to maintain this standard of living? And what changes in retirement from when I am working from an expense side?

Read More

Mailbag: Should I Combine My Old 401(k) Accounts?

March 24, 2022

What should you do about 401(k) accounts from old jobs? How can you find out what your Social Security benefits would be? Eric answers these questions on today’s show.

Read More

Leave a Comment