Rules of thumb often develop because they’re at least somewhat accurate and are helpful when running off-the-cuff measurements. When it comes to retirement planning, rules of thumb abound, and they’re often quite helpful in setting savings, investment and withdrawal goals. The following seven rules of thumb for retirement planning will help put you on the right track for a comfortable retirement.
1. Have an emergency fund equal to six months’ worth of income
This isn’t strictly a retirement planning goal, but having an emergency fund is the basis for many good financial plans. If you have money on hand to weather small and large emergencies, you’ll be less likely to stop saving in an emergency, borrow from a retirement plan or rack up high-interest debt because of unexpected expenses. And even if you do have an emergency fund, you don’t have to stick it into an account that earns next to no interest. There are plenty of great places to put an emergency fund, like a high-interest savings account or CD ladder.