3 outdated retirement rules that could cost you

These guidelines could potentially lead to problems in retirement

Most people want to save as much as possible for retirement, and oftentimes that means listening to the experts about how, exactly, to plan for your senior years.

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Unfortunately, though, there's a lot of not-so-great advice floating around out there, and some of the most well-known retirement rules no longer apply to today's workers. As you're planning for retirement, you may be better off steering clear of these outdated guidelines.

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1. The 4% rule

The 4% rule has been around since the mid-1990s, and it states that you can withdraw 4% of your total savings during the first year of retirement, then adjust your withdrawals each year after to account for inflation.

While the 4% rule is still a good benchmark to get an idea of roughly how much you can spend each year in retirement, it has its flaws. For one, bond yields have dropped dramatically over the last couple of decades, so your retirement investments may not grow as much as the 4% rule assumes. In other words, withdrawing 4% per year may cause your savings to run out sooner than expected.

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Another drawback to this rule is that it assumes you'll be spending the same amount each year in retirement. However, many retirees see their spending fluctuate from year to year. You may spend more each year when you first retire, for example, before your spending levels taper off. Then as you get older, you could end up spending more again if you develop costly health issues. The 4% rule doesn't account for these fluctuations, and sticking to a strict spending limit each year could be unrealistic.

2. The 70% rule

Another common guideline is that you'll need around 70% of your pre-retirement annual income to retire comfortably. So if you're spending, say, $50,000 per year now, for example, you'd only need around $35,000 per year in retirement. In some cases, this rule of thumb may be accurate. But in other scenarios, you could end up saving far less than you actually need.

Rather than relying on an arbitrary number to determine how much you'll spend each year in retirement, consider mapping out your future expenses. Think about how your costs will change once you retire. You may end up spending less than you are now, or your costs could skyrocket -- particularly if you plan to travel extensively or pick up expensive new hobbies.

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Of course, you won't be able to predict exactly how much you'll spend each year in retirement. But try to come up with a rough estimate, because that will give you a better idea of how much you should aim to save.

3. The debt-free rule

Some experts advise paying off all your debt before you retire, and while that's not necessarily a bad goal, it could hurt your ability to save. If you only have a limited amount of cash to spare each month and you have to choose between paying off debt and saving for retirement, it's sometimes better to put that money toward retirement.

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The exception is if you're drowning in high-interest debt, because that type of debt can be incredibly costly. In some cases, you could even end up paying more in interest on your debt than you're earning on your retirement savings.

But if you only have lower-interest debt -- such as a mortgage -- it's not necessarily a bad thing to retire before you're debt-free. Preparing for retirement takes decades, and if you put off saving so you can pay down debt, you might run out of time to reach your retirement goals.

Sometimes bad advice can be costly

Saving for retirement can be challenging, and it's never a bad idea to look for advice on how to prepare. But it's important to ensure this advice is accurate, because outdated retirement rules can sometimes do more harm than good.

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