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Pandemic-era restrictions and high unemployment have pushed many people’s retirement plans behind schedule. You may be wondering if “tried and true” approaches to retirement savings are still going to be able to provide a sustainable nest egg.
No matter what your current financial situation is or what your retirement goals are, there is no one correct way to handle your financial planning.
As we turn the corner on the COVID-19 pandemic, it’s an especially good time to reevaluate your assumptions about topics like claiming Social Security and investing during retirement, and to consider making a post-pandemic change.
Breaking away from the following retirement planning rules and instead making decisions that are right for you can set you up for a more comfortable and less stressful retirement.
Rule No. 1: Wait until age 70 to claim Social Security
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Delaying claiming Social Security means a higher monthly benefit amount — every month, for the rest of your life. For that reason, many people are better off delaying claiming until as late as age 70 — but that doesn’t mean everyone is.
This may be particularly important to consider if you have health problems that may impact your life expectancy, for example.
For someone with a relatively short life expectancy, claiming early and thus receiving a lower Social Security benefit for a longer period of time could add up to more benefits over the course of their retirement than if they postponed claiming and received a higher amount over a shorter period.
For other situations in which people tend to be better off claiming early, check out “5 Times When It’s Smart to Claim Social Security Early.”
Rule No. 2: Follow the 4% rule
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The 4% rule essentially says retirees should not withdraw more than 4% of their savings annually. It aims to provide a steady income through retirement without exhausting your savings. But it comes from a time when the average life expectancy was shorter and bonds offered better returns.
Living longer or earning lower returns on your investments than you expected means that following this rule could cause you to burn through your savings too fast. Recent research suggests 3.3% is a more safe figure these days, as we detail in “Are You Withdrawing Too Much From Retirement Accounts?”
The 4% rule has merit as a reminder that you generally must keep retirement withdrawals small to make your savings last. It also can help guide people who are trying to estimate how much money they will need for retirement. But the 4% rule is more of a rule of thumb than a hard-and-fast, one-size-fits-all …….
Source: https://www.moneytalksnews.com/slideshows/retirement-planning-rules-you-should-rethink/