Post By: Dana Sunderlin
There are many things that people do not know about preparing for retirement, especially in terms of saving their money. There is an excess of information on retirement planning available to those who need it; however, amongst this information are myths and misinformation about saving your money.
There are three major retirement-savings myths floating around society today. The first is that you should “replace a certain percentage of your income in retirement.” People are typically told to replace around 74% of their income in retirement. This replacement rate winds up being much too high and was developed solely to promote sales of products, such as mutual funds. The second myth is that you should “hold a combination of stocks and bonds in your 401K.” Although it is not argued that a person’s financial assets should have diversity, it is not necessary for a 401K to be diversified. You should hold bonds in your retirement accounts and stocks in regular accounts to receive the best tax rewards. The third myth that people often come across is that “a broker can help you get higher returns.” It has been proven that around 80% of mutual funds managers underperform the market. You need to pay a high price for someone to manage your money, and it is a risky investment!
Since there are so many myths and so much false information available, the Retirement Savings Education Campaign was founded. It contains information for employees, small businesses, and employers about saving for retirement. It has separate sections of information depending on your employment status, and it has detailed information on investing and diversification. It’s definitely important to start saving early and to get the right mix of stocks, bond, and cash in your retirement portfolio. However, to do this, it is necessary to gather information that is not only useful, but 100% correct. Don’t fall for the myths of retirement saving!
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