December 30, 2010

10 Retirement Myths

Lets take a look at these 10 Retirement Myths from US News via Yahoo.   Here is the list from the article:

1. You don't make enough money to save for retirement.
2. You need a large income to become wealthy.
3. You will earn 11 percent in the stock market every year.
4. Your money is safer out of the market.
5. You can do better by investing on your own.
6. You need to be debt free before you can invest for retirement.
7. A 401(k) is the best place to invest for retirement.
8. Social Security benefits will be enough to retire on.
9. You have to retire at age ___.
10. You won't ever be able to afford to retire.

This is a pretty good list and most of these are myths that are not true that people should be aware of.

I agree with most of the items entirely.   #3 and #8 are especially true and people need to realize those.   

On three of the items I slightly disagree with their take:
4.  This one I don't totally agree with.  Your money IS safer in cash than in the stock market.  But the point is that you are saving it to grow it long term.   Long term you'll be safe enough in the market and you'll benefit from higher returns. 
5. Most people can't do better investing on their own.  Its safest and most practical to buy an index fund or a target date fund.   Trying to beat the average in the market is like gambling for most people.   This doesn't stop me from trying it myself, but I know I'm taking a risk when doing it.
7. Sometimes your 401k is the best place for your retirement.   If you have matching employer contributions then your 401k should be your #1 priority for retirement investment at least up to the point of the employer match.

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