Rules to Retire By

Vanguard How America Saves, 2018
Vanguard “How America Saves 2018”
Educate yourself for a job that pays a decent income. 

Morgan Housel points out that “a job you merely like that pays a decent income can eventually offer a level of financial flexibility that lets you pursue passions.”

Save 10 to 15% of your income for retirement. 

Live below your means. Andrew Tobias says there is someone making 10% less than you that is not ragged and homeless. Bill Bernstein says it should be 15%.

Invest it in low-cost, diversified stock and bond index funds. 

The simplest approach is to own everything with total stock and bond funds. The goal is to own the market, not beat it. If they’re not index funds, you’re paying too much.1

Consider adding a total international stock fund. 

Recommendations for international run from zero (John Bogle and Warren Buffet) to 50% (world market capitalization). There’s an argument that foreign sales by U.S. companies provide international exposure, but about 50% of the world’s stock is in ex-U.S. companies that sell to the U.S. My total international is 30% of all stock funds.

Start with a stock/bond split of 90/10. 

Feel free to adjust this by ±10%, depending on your risk tolerance. Having bonds in your portfolio will reduce losses, and everyone hates losses more than they enjoy gains.

Increase bonds by 10% each decade. 

You should be at 50/50 in late retirement, when you no longer have to worry about your investment horizon. You don’t need no expensive, glide-path target fund.

Fill all the tax-advantaged accounts available. 

Even a bad 401(k) is better than taxable, and eventually you can roll it over to a better 401(k) or IRA. When I retired I had a traditional 401(k) and a Roth IRA for myself and my spouse.

No life insurance product is a good investment. 

Don’t let a salesperson convince you otherwise. “Life insurance is only considered an asset class by those who sell it.” 

More Guidelines than Rules

Looking back, these seem to have been the most helpful. They are “more what you call guidelines than actual rules.”


This is my personal experience, and not professional investing advice. For that you should talk to a Certified Financial Planner, preferably for a fixed fee and not a sales commission. Make sure you ask how the advisor gets paid. Does her agreement promise to meet a fiduciary standard?


1 Don’t be fooled by active funds posing as index funds. The Rydex S&P 500 C (RYSYX) is an active fund with an expense ratio (ER) of 2.33%. Even a fund whose goal is to match an index can be “highway robbery”.