Rules of Thumb

Let’s look at some of the more common ones.
The 4% Safe Rate of Withdrawl
.  I’ve probably read 4 or 5 articles on this in the past couple of years debating whether this still holds true.   Essentially, it assumes that a given diversified portfolio will provide 4% of income through thick and thin without encroaching on the principal over time.   There are lots of factors that go into this statement but most people need a defined dollar amount for their needs which may be much more or much less than 4%.
The Percentage of Bonds and GICs in your Portfolio Should Equal your Age
.  Says who?  If you are 40 and are buying a house next year with 100% of your current portfolio then your cash and cash equivalents should be 100%.  If you are in your more mature years and have more than enough income for your own needs and the right temperament you may be trying to grow your capital and maximize your estate.  Is that a crime?
You need 70% of Pre-Retirement Income in Retirement
.  Who does?  If I’m retired and have both the health and means, I have much more time to spend my money on things like travel, good food and other adventures.  If you still carry mortgage debt and are helping your kids with college and home purchases you may need the same.  Conversely, if you are debt free, don’t travel and live well below your means you might only need 50% or less.  Many will move into and through different stages of spending in a retirement that can span decades.
The Average Canadian Needs $672,000 (or some other figure) to Retire
.  These figures always seem to pop-up when you go to a company sponsored retirement seminar.  But the question should be, “do I know how much I need?”  Does that figure above factor in CPP, Old Age Security and my Defined Benefit Program?  What retirement age and longevity factor are you using?   What are my options if I don’t have it.  Lot to cover in 90 minutes.   Can be very useful in understanding what your employer plan will provide but often creates more questions than answers on retirement.
Rules of thumb are interesting but not too useful in financial planning.  They generally indicate that we (investment community and individuals) are not willing to invest the time in calculating what you actually need.