The theme this week on the One Minute Retirement Tip podcast is: Retirement Rules of Thumb You Should Ignore 

Today, I’m talking about the most common personal finance rule that I see, which is save 10% of your income for retirement. 

The assumption that’s baked into this advice is that you start saving early in your career - usually your 20s or 30s. Many people don’t save that early, and it’s rare that I see someone saving 10% of their income at that age. People in their 20s and 30s usually have student loans to pay off, and even if they don’t their incomes are going disproportionately toward car payments, rent, and usually savings to buy a house. 

You may only need to save 5% of your income for a comfortable retirement, or it could be 20% or more. If you plan to live a frugal retirement like many retirees today, even if you started saving later in life, you may still need to save less than 10% of your income.

The other reason why this rule of thumb isn’t really that useful for most people is that saving more when you’re close to retirement isn’t as important as working longer. If you’re close to retirement and not yet where you need to be financially to retire, then in almost all cases you’ll benefit much more by working a little longer than saving more. 

Why? The benefits of working longer are multi-faceted. You’ll be able to delay social security. You’ll spend less time overall  in retirement so your portfolio doesn’t have to provide income for as many years. You’ll often spend more time working in your peak earning years. There’s also health benefits to working longer. People who work longer, especially if you enjoy your work, tend to live longer as well and tend to be happier overall. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance