Retirement Investing Myths

Julia M. Carlson |

Myth 1:  100 minus your age equals the percentage of stocks to keep in your portfolio.  If you’re 40 years old, for example, this myth recommends keeping 60 percent of your portfolio in stocks.  As you age, this number becomes progressively more conservative.  The problem is this equation is too broad and restrictive to apply to the many possible nuances in personal investment strategies and retirement goals.  Instead, consider creating an asset allocation that matches your risk tolerance, time horizon, and financial goals, and be willing to adjust it as you go.  Keep in mind, asset allocation does not ensure a profit or protect against a loss.  Investing involves risk, including loss of principal.

Myth 2: A sustainable withdrawal rate is 4%.  Determining how much money you can safely withdraw from your savings and investments in retirement is an important calculation, and the thinking on this “rule” is changing all the time.  Some experts suggest withdrawing a lesser percentage each year; others recommend rate changes based on how your investments perform.  But no one can predict how much money you will need to sustain a comfortable retirement.  Only time will tell.

One rule that matters: Stay flexible! One thing to expect in retirement is that things change and sometimes rapidly as we’ve seen in the past 6 months.  A good rule you can successfully follow in retirement, is to stay flexible.  Have a plan, stick to it, and be prepared to reassess and modify as time goes by.



Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

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