Avoiding Bad Retirement Investing Strategies

Bad retirement investing methods aren't that easy to spot, as even some so-called retirement experts and investment planners advise many an unknowing worker on how to integrate these into his or her retirement planning. The worst offenders are the universal sustainable withdrawal rate, or the exact percentage of income replacement that supposedly work for all retirees. These concepts can contribute to your financial ruin, or can be useless, at best.

If you've reached the normal retirement age of 65 and have enough to add $40,000 yearly to your Social Security benefits for the same period, you may be able to survive on a million-dollar nest egg. If you don't have the aforementioned figures, don't expect a million dollars to last the rest of your life.

Also, a nest egg that can give you 75%-80% of your income while you were still working isn't a sure thing for retirement, and so are the other recommended percentages. These serve as a very loose guideline to help you start estimating how much you should set aside, but the actual amount depends on your personal situation (which includes an overwhelming number of factors such as inflation rates, profit growth, investment losses, taxes, and so on).

To illustrate that there's no such thing as an absolute figure for income replacement or sustainable withdrawal rates, for example, assume that you're married and earning a joint amount of $100,000 yearly. Also assume that you spend about 50% of that yearly while living on the bare necessities. That estimated $50,000 in annual expenses is bound to change as some expenses (such as the costs of commuting) can drop when you retire, while others (like utilities) may shoot up dramatically. If you use credit cards, savings, or home equity to support a comparatively luxurious lifestyle, the financial situation changes even further.

Bad retirement investing and planning comes in all shapes and forms. While absolutes such as a specific sustainable withdrawal rate, percentage of income replacement, and an exact amount for your nest egg can be comparatively easy to spot and avoid, there are other strategies and methods out there that can erode your nest egg rather than boost it. Talk to your investment planner or financial advisor for more information.