7 Rules of Thumb for Retirement Savings

You can use some simple rules of thumb for retirement savings to help guide you. A rule of thumb is a broad guideline or principle based on experience or practice rather than theory or research. We often use rules of thumb in our daily lives. For example, have you ever said to yourself (or someone) “Better safe than sorry”? Or how about “When all else fails, reboot.” My mother used to tell me “Never use dull knives.” There is the always handy “Measure twice and cut once” and “A watched pot never boils.” Do you know the plumber’s rule of thumb?

Here are my seven rules of thumb when it comes to saving for retirement:

  1. Borrow for kids’ education, save for retirement.
  2. Save at least 15% of your pre-tax income.
  3. Use mutual funds and ETFs with expense ratios as close to 0% as possible.
  4. Don’t invest in something you don’t understand.
  5. Time in the market is more important than timing the market.
  6. It doesn’t matter what you make, it matters what you keep.
  7. Your house is only worth what someone is willing to pay for it.

Of course, these are general guidelines, and you should follow advice that is specific to your situation. Consult with a good fee-only and fiduciary financial advisor for advice and guidance and other qualified professionals for tax and estate planning advice.

You can find many articles on personal finance rules of thumb by doing a Google search. One of the better lists comes from J.D. Roth of Get Rich Slowly. Here’s a link to J.D.’s 18 favorite financial rules of thumb. Hope these seven rules of thumb help you in your retirement savings.

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