The Setup:

Just like technologies change and become outdated, so do some retirement planning strategies. Let’s look at five financial strategies that have become obsolete.

Click the timestamps below to skip to a specific topic in the episode.

The Combination and Key Points: 

On this episode of Unlocking Your Financial Future, we look 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.

This is still pretty relevant in some situations. But where you’re going to struggle with this is the makeup or consistency of your portfolio as you include more fixed income or dead instruments, like bonds.

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 numbers are way out of line today.

A straight index fund in the S&P 500 for the past 10 years averaged about 15%. Bonds averaged 3.58%, and cash averaged .64%.

Move money from stocks to bonds as you get older

If you’re moving your money to bonds right now as you get older, you’re basically saying, “Well, I’m going to lose money at some point.” And you’re OK with that just because of safety.

There are other ways you can find safety and find safer investments without exposure to that future loss.

$1 million retirement target

A common goal was for everyone to save $1 million for retirement. But it really depends on the client.

Do they have a pension? What does their Social Security look like? What lifestyle do they want in retirement? What part of the country do they live in?

You’ll need less money in retirement

Again, this really depends on the client. We like to find out what our clients’ financial goals are. Most people are not sure.

A good benchmark is to take how much you’re making in salary before retirement and seeing if you can match it in retirement to make a smooth transition.

To hear more, you can listen to the full episode or use the timestamps below to find a specific segment.

2:55 – 4% rule

4:27 – 10/5/3 rule

6:22 – Move money from stocks to bonds as you get older

7:44 – $1 million retirement target

9:42 – Needing less money in retirement

11:52 – Mailbag: Should we invest differently based on the election?

14:42 – Mailbag: Should I buy gold coins, gold bars or no gold at all?

Thanks for listening to another episode of Unlocking Your Financial Future. We’ll talk to you again next week!


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