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Retirement Myths
By Ken Morris
It is an unfortunate fact that many Americans spend less time
planning for their retirement than planning for their vacations.
All it takes is intelligent planning - and a clear understanding
of the myths that hinder us from building a secure retirement.
Consider the following myths:
- Myth #1: I'm too young to worry about retirement. You're never
too young to make plans. The sooner you begin saving for
retirement, the less you'll have to put aside. For example, if
you want to have a $200,000 nest egg by age 65, you'll only have
to save about $26 a week if you start at age 35. But if you wait
until you're 55 to start, you'd have to put aside $233 every
week. (Both cases assume that your money is invested earning a
hypothetical 9-percent return. This example is for illustrative
purposes only and is not intended to reflect the actual
performance of any security. Investing involves risk and you may
incur a profit or a loss.)
- Myth #2: I won't need much to
live on. Many experts estimate that on average, to maintain your
standard of living in retirement, you'll need 60 to 80 percent
of your pre-retirement income. And that income has to continue
to grow enough in an attempt to keep up with inflation.
- Myth #3: My kids will take care of me. Most children want to lend
their aging parents a hand, but many can't afford to. About the
time you're ready to retire, they'll be paying their children's
college tuition - and saving for their own retirement. You'd be
wise, therefore, to leave the kids out of your plans.
- Myth #4: Social Security will take care of me. Although it's unwise
to expect Social Security to cover all your costs, you can take
steps to increase your benefits. Work as long as possible. You
can start collecting Social Security at age 62, but your
benefits may be reduced by 20 percent. If, on the other hand,
you work until age 70 you'll receive even more.
- Myth #5: I can't afford to put money away where I can't touch it for many
years. The truth is, you can't afford not to participate in tax
deferred retirement plans. Contributions to 401(k) and similar
employer sponsored plans may reduce your current taxation. In
addition, taxes are also deferred on earnings, so retirement
savings have the potential to grow faster than others do. Best
of all, many employers match all or part of your contributions
to employer sponsored retirement plans, giving you money you
would not otherwise have. The one drawback is that you may have
to pay a 10-percent penalty, plus current income taxes, if you
withdraw money out of a retirement plan before you're 59 ½.
What should you do? A comfortable retirement requires looking
the facts squarely in the face - creating a realistic plan that
works for you. Of course, this brief article is no substitute
for a careful analysis of your personal circumstances. Before
implementing any significant tax or financial planning strategy,
contact your financial advisor, attorney or tax advisor as
appropriate.
About the author:
"Can somebody please help me watch, manage, invest or oversee my
401k" is the question Mr. Morris hears most often that causes
him the most concern. Fearing the American worker is being left
in the dark, Mr. Morris, a fee based Investment Advisor
Representative, based in Central Ohio, with Raymond James
Financial Services, Inc., helps 401k participants get the
most out of their retirement.
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