New take on old financial adages

Don't pay taxes when you can defer them. You only need 80 percent of your income after retirement. Subtract your age from 100 and devote that percentage of your investments to stocks.

Those are a few old financial sayings that aren't the best advice today, according to John Klevens, a principal with Klevens Capital Management in Bellevue and member of the Financial Planning Association.

"People go to retirement seminars and are told that if you're making $100,000 a year now, you'll need $80,000 when you retire. That's misleading," Klevens said.

Eventually spending drops off, he said, but new retirees "go on trips, remodel the house, and do all the things they couldn't do when they were working." Today it's more likely that you'll need 100 percent of your income for at least the first five years of retirement.

He also cautions against the financial adage of subtracting your age from 100 to determine how much stock you should hold. Using that guideline, a 45-year-old should have 55 percent of their investments in stocks with the remainder in bonds and cash.

"That rule is quick and easy to remember, but it's not appropriate for everyone," Klevens said. "It doesn't take into account how much risk an investor is comfortable with."

Investors have also been conditioned to believe they should defer taxes whenever possible. Tax deferral, through a traditional IRA for example, allows more money to grow through the years, and assumes the investor will be in a lower tax bracket when he or she pays taxes on the funds after retirement.

For some people, it makes sense to pay the taxes first, Klevens said.

"Would you rather pay a tax on the seed money, or on the whole harvest?"

While some financial adages aren't as useful as they once seemed, Benjamin Franklin was on to something with, "A penny saved is a penny earned."

"My most successful clients are not the ones who have the highest incomes or assets," Klevens said, "they're the people who spend the least."