Rules of thumb are very convenient for planning your retirement finances, but they also are often wrong. So you need to take any rule you hear with more than a grain of salt.
- "Social Security will pay your bills. Social Security alone probably won't be enough to provide a comfortable retirement," he writes. "The average Social Security retirement benefit is $1,328 a month. Do you really think you can live on $15,936 per year?" Sightings asks.
- "Inflation is low, so don't worry about it." True, consumer prices actually declined 0.1 percent in the year through January, the first 12-month fall since October 2009. "But remember the 1970s and 1980s, when inflation more typically came in at 5 percent?" At some point inflation will rebound, possibly during your retirement.
- "Maybe you'll receive an inheritance. The key word is maybe."
"None of this is meant to frighten you, but to forewarn you about latching on to a myth or rumor when making important retirement decisions. Retirement rules of thumb often need to be adjusted to fit your personal circumstances," he writes.
Meanwhile, four crucial factors when you're searching for retirement investments are safety, diversity, dividends and expenses. Investors should find funds that shine in those areas and include them, in their retirement portfolio, according to John Waggoner of USA Today
One such fund is the Vanguard Target Retirement Income (VTINX). This is a fund of funds designed as an all-in-one solution for retirees who want to see both their principal and income increase, he writes. The fund allocates 65 percent of assets to bonds and 20 percent to U.S. stocks.
Morningstar gives VTINX its top rating — gold. "Vanguard Target Retirement's unassuming construction has appeal," writes Morningstar analyst Kathryn Spica
. "The glide path starts with an industry-average 90 percent/10 percent stock/bond split, keeping a slightly higher allocation to stocks as it gradually rolls down that exposure. . . . By forgoing tactical asset-allocation shifts, the series' results are not prone to timing missteps, letting its overall asset allocation drive results."
The fund has produced an average annual return of 5.6 percent in the past three years, sports a yield of 1.8 percent and has an expense ratio of 0.16 percent.
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