Retirement Fact or Fiction

As we already know, retirement is not an easy thing to plan for. While there is almost limitless information available on the internet about the subject, like everything else on the web, not all of it is true. To help get rid of some of the confusion, here is some retirement fact or fiction, unfortunately without Skip.

1- You need to diversify your 401(k)

Fiction. It isn’t necessary to diversify your 401(k) like it is necessary to diversify your portfolio. To make the most out of tax breaks, it’s best that you hold bonds in your retirement accounts and stocks in regular accounts. As always, younger people should have a higher equity to fixed income ratio, but as you get older, you want more fixed income.

2- You should replace a certain amount of income during retirement

Fact. This is true, but most of the time, the recommended replacement is too high. Usually, a professional will recommend around 75%, but in reality, the needed number is much lower.

3- You don’t need to beat the market, you just need to be making money.

Fiction. You would probably make out okay if you made money all the time but did not beat the market, but that’s just leaving money on the table. If you aren’t beating the market after taxes and commissions, you’re leaving money out there and you should then reconsider your approach or hire/change brokers.

Sources
mint.com
msn.com
cnnmoney.com

by Rob Wildhack