The 4 Percent Rule of Thumb for Retirement

Have you been sticking to longstanding rules and guidelines as you save for retirement?

Have you been thinking that some of these tips and tricks for retirement seem a little outdated?

You’re not alone! According to Forbes, “many investment advisors have suggested that [these rules] are old-school and that there are a variety of factors and new possibilities to consider.”

In the mid-1990s, a rule of thumb to guide a person through retirement was the “4% Rule”. This rule outlined how much a person could safely withdraw from retirement savings each year and still have a nest egg to last a lifetime (in this case, 30 years).

Many advisors are now saying that while this is still a good rule of thumb, “it doesn’t address issues such as increasingly high healthcare costs, longer life expectancies, and jobs that are sustainable throughout old age.”

While you can always stick with the 4% Rule as a baseline to plan for retirement, here are some additional ideas for investment that could be right for you:

  1. Tax-deferred investing – According to Bruce W. McNeilage of Kinloch Partners, LLC., “Being taxed at the highest rate versus paying a lower tax rate is somewhat misleading. Many people defer taxes on their investments because they don’t want to pay 30% or 40% income taxes when in fact they could be deferring to a higher tax bracket, say 50% or 60% if tax laws change.”
  2.  Invest in real estate – Real estate, primarily single-family rentals, provide several attributes that savings don’t. If you buy a rental house with a small capital investment, the house will appreciate over time on a tax-deferred basis. In addition, single-family rental properties can be paid off over 15 or 20 years and can create income for the owner.
  3. Use a multi-discipline retirement strategy – This type of strategy is based on a combination of globally diversified stocks and high-quality fixed indexed annuities that offer growth and protection.

The best advice you can take is to reach out to your trusted retirement planner often, and whenever you have questions or want to make adjustments.

Trust Imber Wealth Advisors for Retirement in Ann Arbor!

At Imber Wealth Advisors, we know that retirement is about much more than money. We want to help you achieve all your retirement goals, whether they be more traveling, more time with family, or to pass on the family business after years of hard work. Whatever you goals are, we want to help. Contact us today to get started!

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