By Sarah Stewart Legal Group PLLC
U.S. Citizens are well-known for their lack of retirement planning. According to a 2016 Retirement Confidence Survey, 26% of those surveyed said they had saved less than $1,000 for retirement. More than 50% saved less than $25,000 for retirement. Moreover, a Fidelity Investments study in 2017 found that more than 1/5 of workers aren’t contributing enough to their 401(k)s to receive the full benefit of employer-matching.
Whether you’re a Baby Boomer, a Gen X-er, or a Millennial, if you want to retire someday, you need to be aware of some common retirement myths that can stop you from saving the most you can for your best retirement.
(1) You Should Only Invest in 401(k)s and IRAs
Traditional retirement accounts have penalties for withdrawing money before you are 59 1/2 years old. When you consider your retirement plan, if you have any idea you may want to retire early, you will want to invest at least a portion of your money in non-retirement, taxable accounts so that you can fund any years of retirement before age 59 1/2.
(2) You Don’t Have to Invest After Retirement
People are living longer and longer every year. It is estimated that there are currently more than 72,000 people over the age of 100 in the U.S. Assuming you want to retire at the average retirement age of 62, you can have up to 38 years of retirement. Mind blowing- right?
Because we are all living longer, we have to stretch our retirement dollars further. Make a plan that can cover you if you live until 100. It’s better to plan too much, than not enough. You don’t want to end up standing on your child’s/grandchild’s doorstep at 80 because your retirement ran out.
(3) You Can Always Invest the Same Amount
As you get older, your income, and lifestyle expenses, increase. Be sure you invest more in your retirement account to accommodate these lifestyle changes. You don’t want to eat caviar when your 40 and be forced to eat Ramen noodles every night when you’re 70.
(4) You Don’t Need to Plan Distributions
Our goal is to make sure we don’t run out of money in retirement. We want to plan distributions so we can be sure we are using our assets for stable income throughout our retirement.
(5) You Only Need to Save 10-15% of Your Income
If you started saving for your retirement in your 20s, saving 10 – 15% of your income each year works because interest compounds. If you started saving later, you need to increase your savings to catch up.
With that being said, put aside whatever you can whenever you can. Set up a monthly bank draft of a set amount so that you can be sure you are saving. Everything will add up, and because of compounding interest, the sooner you start, the better.
(6) Financial Advisors Always Work in Your Best Interests
Not all financial planners are created equal. Though many people believe financial advisors have to work in your best interests, it simply isn’t true. Only financial planners who are fiduciaries are required by law to act in your best interests. Ask your financial advisor if he/she is a fiduciary and look for someone who says “yes.”
If you have not started a retirement or estate plan, reach out to professionals today!