The Pros and Cons of Following These Popular Retirement Spending Guidelines

man enjoying kayaking on a lake during retirement

A common error made by many retirees is to underestimate the spending needed to ensure a comfortable lifestyle in retirement.

Here are some practical suggestions for you to consider as you prepare for your golden years.

There are a few rules of thumb that may offer some guidance as you prepare for retirement. While they can be useful starting points, none are satisfactory substitutes for careful planning.
 

The 4% rule.

This is a well-known retirement planning aid that is meant to keep you from outliving your money. It states that you can withdraw 4% of your savings annually when you retire and then adjust for inflation. On the plus side, the rule is easy to follow, provides steady income, and in theory should provide 30 years of funding. However, it doesn’t dynamically account for individual needs, is unresponsive to market conditions, and cannot guarantee that your money will last.
 

The 25x rule.

This rule, popular among folks in the FIRE (financial independence, retire early) community, states that you should save 25 times your expected annual retirement spending, without regard to Social Security and pensions. The value is in encouraging workers to aggressively save before retirement. But it assumes a 7% annual return on stock investments, ignores inflation, and doesn’t estimate how much to withdraw during retirement.
 

Retirement calculators.

You can find many online calculators that can help you estimate how much to save annually to fund your desired retirement lifestyle. These calculators can have many inputs, including your current savings, projected spending, expected post-retirement income, and assumptions about your retirement age, life expectancy, inflation, and more. While these can be handy “what-if” tools, they are complicated and rely on estimates that may be incorrect.
 

The financial plan.

No rule of thumb can substitute for a holistic financial plan that encompasses all the important factors impacting your wealth. A financial plan not only takes into account all your income and spending projections, but also includes investment, tax, estate, insurance, and charitable planning. A financial professional can be instrumental in helping you prepare a plan that will help you set goals now while evolving over time to accommodate changes.
 

Retirement planning isn’t simple.

You put your retirement at risk if you rely on simplistic rules of thumb to influence your planning. A well-conceived and integrated financial plan will give you the guidance you need to address your retirement goals.

Call us today to create or review your financial plans. We can work together to develop a plan that will help you work toward the retirement you desire.

Let's Connect

  • Broker                                                                          LPL Financial Form CRS


    Your Bank (“SouthState Bank”) provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for brokerage or advisory services.
    Please visit https://www.lpl.com/disclosures/is-lpl-relationship-disclosure.html for more detailed information.

    *Please consult your tax-advisor for tax related issues.
    **Products and services offered through LPL Financial.

    Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC.). Insurance products are offered through LPL or its licensed affiliates. SouthState Bank, N.A. and SouthState Investment Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using SouthState Investment Services and may also be employees of SouthState Bank, N.A. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, SouthState Bank, N.A. or SouthState Investment Services. Securities and insurance offered through LPL or its affiliates are:

    The services offered within this investment site are available exclusively through our U.S. registered representatives and are available for U.S. residents only. LPL Financial U.S. registered representatives may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.

  • This material was prepared for SouthState Investment Services and does not necessarily represent the views of the presenting party or their affiliates. This information has been derived from sources believed to be accurate. Please note—investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Secure Log In

Close login menu
Login Error

Your username is valid but has a problem. Please call customer support

Our website uses cookies to ensure your online experience is as informative and relevant as possible. Please review our Privacy Policy to learn more about the information we collect.