Is It Time to Retire These Retirement 'Rules'?

Rather than picking a numerical income target based on what you used to earn, plan around what you expect to spend. Pencil out a retirement budget, including estimates for travel, new hobbies or overdue home repairs.

Revisit your budget annually, or do spot checks to account for significant changes such as a health crisis or unexpected windfall. A certified financial planner can help build a budget based on your needs; many work on an hourly basis or for a flat fee. The National Association of Personal Financial Advisors and the CFP Board of Standards have search tools you can use to find one in your area.

3. The tax-deferral rule

The rule: The money you put into a traditional IRA or 401(k) isn’t taxed until you take it out. Assuming you’ll have less income and be in a lower tax bracket in retirement, it makes sense to defer those taxes until then.

The rethink: You may have to make some big withdrawals to cover big-ticket expenses in retirement for things like home modifications or long-term care. With your money in tax-deferred accounts, “every expense is more expensive,” says Scott Cole, founder and president of Cole Financial Planning and Wealth Management in Birmingham, Alabama.

Say you need $10,000 to repair your roof. You’ll have to take out $10,000 plus enough to cover the taxes you owe on the withdrawal. In effect, Cole says, that money “isn’t 100 percent yours.” Income from those big withdrawals could also put you back in a higher tax bracket.

Withdrawals from a Roth IRA or Roth 401(k) are not taxed since you pay taxes upfront on your contributions. Converting some pre-tax savings to a Roth account means paying taxes on the converted amount now but could spare you big tax bills and big headaches down the road. Being able to pick and choose which account to draw from when “gives you flexibility so you can react to whatever the tax situation is,” Cole says.

4. The rule of 110

The rule: The share of your assets invested in stocks or stock funds should be 110 minus your current age. For instance, a 45-year-old should have 65 percent of their retirement savings in stocks, a 55-year-old should have 55 percent, and so on. As you get older and have less time to recover from a market downturn, the balance steadily tips toward less risky holdings like cash and bonds.

The rethink: Your risk tolerance and financial goals may not closely map to your age. “An older person could be 75 percent in stocks if they could handle the volatility and perhaps had other resources, such as a pension,” says Gordon Achtermann, president of Silverstone Financial in Annandale, Virginia.

Just as spending ebbs and flows throughout retirement, your investments should, too, says Ryan Derousseau, a financial adviser at United Financial Planning Group in Hauppauge, New York. For example, reducing your stock holdings too early means forfeiting potential gains that could come in handy if your medical costs spike.

“That money could be invested and growing,” he says. “You’re so fearful of losing money, you’re not taking advantage of this lull to protect you long-term.”

5. The 95-year-lifespan rule

The rule: Project your retirement income needs as if you will live to 95 to minimize the odds of outliving your money.

The rethink: Strategizing to avoid running out of money at the end of life is prudent, but few people make it to age 95. Among Americans ages 60 and older, 95 percent “have at least one chronic health condition that may impact longevity,” health care data company HealthView Services notes in a recent white paper on lifespan and financial planning.

A realistic assessment of your probable lifespan, based on actuarial data and accounting for variables such as age, sex and health, makes a better starting point for assessing your retirement needs, the report concludes. You may find, for example, that you can afford to spend more on the things you want to do in retirement while you can still enjoy them.

“It’s all about living as much as you can in those early years,” says Robert Pagliarini, president and founder of Pacifica Wealth Advisors in Irvine, California. “I really strongly suggest that, as you enter retirement or even a year before, plan the trips you want to take and the hobbies you want to take up.”

6. The delay-Social Security rule

The rule: You can claim your biggest Social Security retirement benefit at age 70, so you should put it off until then.

The rethink: The math is undeniable. Say you were born in 1963. If you start Social Security this year at the minimum age of 62, you’ll get 70 percent of the monthly benefit calculated from your lifetime earnings record. At your full retirement age — in this case, 67 — you'd get 100 percent. Each year you wait after that, you'd get another 8 percent, up to a maximum of 124 percent at 70.

Still, the most recent Social Security data shows that in 2023, less than 9 percent of retirees claimed benefits at 70 or later. More than 1 in 5 (22.5 percent) filed at 62. There can be good reasons for starting Social Security early, even if it means receiving less per month.

“It may be that you have a serious health issue that affects your life expectancy, or you lack other income sources and need that money now,” says Douglas Boneparth, president of Bone Fide Wealth in New York City. In these situations, it might make sense to start collecting benefits sooner.

An early claim could also benefit married couples with wide income disparities, who may be able to maximize their lifetime Social Security income by strategizing around spousal benefits. For example, the lower earner could claim their retirement benefit early to provide some immediate income, then switch to a bigger spousal benefit when the higher-earning partner files.

With an online My Social Security account, you can check estimated retirement and spousal benefits to see if this strategy could work for you.

7. The downsizing rule

The rule: The kids are gone, and the stairs are starting to strain your knees. Do you still need a big family home? Moving to a smaller place can generate cash from selling the old house, reduce your living costs and provide a more suitable setting for aging in place.

The rethink: Relatively few older adults move. A 2023 report by Harvard’s Joint Center for Housing Studies found that between 2016 and 2021, just 5 percent of households age 65 or older relocated in the previous year compared to 16 percent of those under 65.

Why are so many retirees staying put? For one thing, a hot housing market mitigates the economic benefits of downsizing. According to Redfin, the median U.S. home price has gone up 45 percent in the last five years, from $289,000 to $418,000.

“When you factor in the cost of a new residence and other moving expenses, you may not come out that much ahead,” says Adam.

For another, retirees with low-rate mortgages might balk at today’s higher rates. Freddie Mac reports that the average for a 30-year fixed-rate loan in early March was 6.63 percent.

If you’re otherwise happy where you are, consider renovations to keep your home accessible and safe as your needs change, such as installing a bathroom on the main level or improving the lighting. Many state and local agencies offer guidance on aging-in-place renovations and may provide financial assistance. The federal government's Eldercare Locator can help you find services in your area.