5 Retirement Rules That Need to Be Retired

There are some long-standing retirement “rules of thumb” that still show up in conversations all the time:

• Withdraw 4% a year, and you’ll never run out of money.
• You only need 80% of your current income in retirement.
• Plan to live until age 95.
• Pay off your mortgage as soon as you can.
• Invest 100 minus your age in stocks.

These guidelines worked well for decades. They are simple, easy to follow, and comforting in their certainty. Unfortunately, some of them have not withstood the test of time.

We analyzed the numbers and identified five retirement rules that warrant reconsideration. One should be retired completely. The other four depend on your goals, timeline, and risk tolerance.

If there is one retirement strategy that absolutely needs to be retired, it’s this one:

Save Enough to Live Until Age 95

When this rule was coined, it was rare for someone to celebrate their 95th birthday. So it made sense for age 95 to be the "finish line" for retirement projections.

In 2026, investors (especially younger investors) should plan for a world where people routinely live into their 100s. This isn’t just our view:

• Pew Research projects the number of Americans 100 or older may increase 400% in the next three decades.
• Respected financial expert Ric Edelman urges working-age people to save with the expectation that they will live into their 100s.

Planning to live “only” to age 95 is a huge gamble. If you live longer than expected, even by five or ten years, the financial consequences could be severe. Healthcare costs, long-term care expenses, and inflation do not stop at a predetermined birthday.

The 4 Percent Rule

Here’s an example of the 4% rule in action:

An individual retires with $4 million in their retirement account. The first year, they withdraw 4% ($160,000). The next year, they withdraw $165,000 (4% plus a small increase for inflation). This continues every year for 30 years.

The original research that supported this rule was based on relatively stable market conditions. For better or worse, times have changed.

The twists and turns of recent history have proven the 4% rule only works as a starting place, not a concrete rule. A significant market downturn early in retirement can dollar-cost ravage someone’s savings.

Imagine the individual mentioned above retired in 2005. If they continued withdrawing $165,000 per year, their 2008 or 2009 withdrawals could have been up to 8% of their devalued portfolio. Someone who retired in 2018 or 2019 would have been in the same situation because of the market decline during COVID.

Another reason the 4% rule doesn’t hold up is because it was designed with a 30-year retirement period in mind. Now that people are expected to live longer, the 4% rule could leave a retiree outliving their savings.

Most people are better off following a dynamic withdrawal strategy rather than a strict rule. With a dynamic withdrawal strategy, a wealth manager identifies minimum and maximum withdrawal amounts based on a retiree’s portfolio value, market fluctuations and retirement goals. The retiree can choose any amount within that range based on their plans to travel (or not travel), buy a second home, or other factors.

That said, any withdrawal strategy requires periodic reassessment and adjustments based on market performance and changes in personal circumstances.

You Only Need 80% of Your Current Income in Retirement

The 80% income replacement rule is another guideline that sounds practical but often falls apart under scrutiny. The idea is that retirees only need about 80% of their pre-retirement income to maintain their lifestyle because work-related expenses, such as commuting and retirement contributions, disappear.

In reality, spending patterns vary. Some retirees travel more, pursue expensive hobbies, or support family members. Others downsize, relocate, or find other ways to live a more modest life.

Using a one-size-fits-all percentage ignores lifestyle goals, family commitments, healthcare needs, and tax considerations. It’s better to work with a knowledgeable financial planner instead of relying on an arbitrary percentage that may overestimate or underestimate your budget needs.

Pay Off Your Mortgage Early

Paying off a mortgage early doesn't always make sense, especially if you have a historically low interest rate, such as 3%. Maxing out tax-advantaged retirement accounts often delivers greater long-term value than eliminating low-interest debt prematurely.

Even if your mortgage rate is higher than 3%, it may be beneficial to keep it so you can take advantage of the mortgage interest tax deduction. A CPA, tax planner, or other financial professional can help you make an informed decision about whether to pay off your mortgage early.

Invest 100 Minus Your Age in Stocks 

You may often hear the suggestion to invest 100 minus your age as the percentage of your retirement portfolio allocated to stocks. While this guideline is frequently cited, it isn’t a one-size-fits-all rule and may not be appropriate for every investor.

Under this approach, for example, a 20-year-old would hold about 80% of their portfolio in stocks, while a 55-year-old would hold roughly 45%, with the remaining balance invested in lower-risk assets such as bonds, CDs, or cash equivalents. The logic behind the rule is that as investors age and have less time to recover from market downturns, they should gradually reduce risk.

Some financial planners adjust the formula to 110 or even 120 minus your age, but these variations are still based on the same underlying assumption about risk declining steadily with age. In reality, however, age alone is an incomplete measure of how much risk an investor should take.

A retirement portfolio should be tailored to each individual’s financial situation, time horizon, and tolerance for risk. Even within the same age group, investors can have very different goals and strategies. For instance, “80% in stocks” could mean broadly diversified index funds for one person and a more volatile mix of growth stocks for another. Likewise, a 40-year-old planning to retire at 50 may need a very different allocation than a 40-year-old who expects to work until 70.

Saving for Retirement Isn’t One-Size-Fits-All

Saving for retirement isn’t one-size-fits-all. Rules of thumb can be a starting point, but they can also miss the details that matter most, like taxes, health care, timing, and how long your money may need to last. An experienced financial advisor can help you build a plan around your real goals and adjust it as life changes. We call it a Wealth of Life Plan. For more information, please contact us online or give us a call at (415) 541-7774.

Related Reading:

• A Retirement Spending Strategy That Offers Security and Flexibility
• Should I Pay Off My Mortgage Early? Pros and Cons…
• What Is Goal-Based Investing and Is It Right for You?
• Investing 101: Different Retirement Strategies for Different Goals

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