Planning for retirement often involves following the rulebook everyone has made for you. You’ve probably heard a lot of these “must-dos” and “don’t even think about its” from friends, family, or the internet. However, what works for one person might not make sense for another—and that’s totally okay. Why stick to a strict set of rules when you can personalize your retirement plan to fit your life? Here are eleven retirement rules that it’s okay to break.
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Claiming Social Security Before Full Retirement Age
Everyone says you should wait until you hit full retirement age to use Social Security. However, if waiting means pinching pennies, then claiming those benefits early might be the smarter move. It might even be beneficial if health issues make your future uncertain. While your checks will be smaller, they’ll start coming in when you actually need them. You just need to balance the present with the future.
The 4% Rule
The 4% rule suggests living off 4% of your retirement savings each year. Even though it’s a nice idea, don’t see it as a restriction—some years you’ll spend less and other years you might want to splurge. You should adjust your withdrawals based on how the market’s doing and your personal spending needs. That makes a lot more sense than sticking to a rigid 4%.
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Paying Off Your Mortgage
Entering retirement without a mortgage sounds great but if interest rates are low, it might make more financial sense to keep the mortgage. Then you can just invest your money elsewhere. After all, those investments could earn more than your mortgage costs you—that means you’re coming out ahead. Mortgage interest may also give you a tax break, too. As such, you should remember to look at the big picture and make your money work for you.
Sticking to a Strict Budget
Of course budgeting is important to help you avoid outliving your savings. Don’t let it suck the joy out of life, though! If you’ve always dreamed of traveling or picking up an expensive hobby, find ways to make it work. Life’s too short to miss out on experiences because they don’t fit into a strict budget. Your budget should serve your happiness rather than hinder it.
Never Touching the Principal
The idea of living solely off the interest & dividends from your investments sounds safe. However, the reality is that you sometimes need to dip into the principal. As long as you’re smart about it and adjust your spending as needed, it’s not the end of the world. Who knows? There could be a once-in-a-lifetime trip or an unexpected expense that’s worth it.
Not Working at All
Retiring doesn’t have to mean giving up work. In fact, many retirees work part-time or start businesses—some of them even turn hobbies into income. And why not? It keeps the mind sharp while also giving you some extra cash that doesn’t hurt either. You’ll explore your new interests or continue your professional skills on a less demanding schedule.
Saving a Set Amount
You’ve probably heard you need a million bucks to retire comfortably—yet that number is much too arbitrary. Some people will need more & others will get by on less. It all depends on how you want to live in retirement—so focus on what you’ll need instead of trying to achieve a cookie-cutter amount. After all, your savings goal should fit your lifestyle. It’s your retirement!
Withdrawing from Taxable Accounts First
The usual advice is to use your taxable accounts before touching your retirement accounts. Yet mixing things up may save you on taxes, especially if you’re trying to keep your taxable income in check. You should crunch the numbers each year to see what makes the most sense. In doing so, you’ll manage your tax brackets more efficiently and potentially save you a significant amount in taxes over the long haul. It also gives you more control over your financial situation.
Downsizing Your Home
Sure, moving to a smaller place might save you some money & hassle. But if you love your home and you can afford to stay, why move? Your home’s comfort may be worth more to you than the money you’d save by downsizing. Staying put could mean you’re surrounded by neighbors you love and a garden you’ve tended for years. You can’t put a price on that.
Keeping Emergency Funds in Cash Only
Having an emergency fund is important & especially so when you stop bringing in a regular paycheck anymore. However, keeping it all in cash isn’t the best move. Inflation will reduce your cash savings over time, reducing your purchasing power. Instead, you might want to keep some of your emergency funds in a high-yield savings account or short-term CDs. This will help your funds grow a bit and keep pace with inflation. It’ll also be accessible when you need it.
Believing You Must Leave a Large Inheritance
Despite what you might’ve heard, successful retirement planning doesn’t have to involve leaving a huge inheritance for your kids or grandkids. Your financial security should come first. It’s okay to prioritize your needs & wants in retirement. After all, the best legacy you can leave your loved ones is the knowledge that you’re well taken care of and happy in your retirement years.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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