You need a big income to have a big nest egg- You can't get rich with a 401(k)
- Everyone has debt
- A million dollars will cover you
- Boomers will crash the market
- Without a pension, you're doomed
- Social Security won't be there
- Your house can finance retirement
- You're too old to start saving
- Short-term market swings don't matter
- Top priority is the kids' college
- Decent savings plan = early retirement
- You're bound to mess up your 401(k)
Each of the points above are explained much further in the CNN Money article. We will cover a few exerpts from each myth which you can than read further by clicking the links in this blog post.
You need a big income to have a big nest egg
Scott saved $800,000 over 20 years . . How did he do
it? When he joined the Marines after two years of college, Scott
started saving $100 a month for education, thinking he'd eventually
return to civilian life and finish school. He ended up staying in the
Marines, but he didn't stop saving. "I never missed the extra money
because I never let myself have it," Scott says. "As I had more, I
increased the amount I saved." ... read more
You can't get rich with a 401(k)
When Tim O'Friel graduated from college, his brother gave him sage
advice: Put as much as you can in a 401(k) and don't touch it. O'Friel
took that to heart, saving 15% of his salary until he reached the IRS
max ($15,500 in 2007). After 13 years of steady contributions, O'Friel,
a contract negotiator for a manufacturing company in Thousand Oaks,
Calif., has a 401(k) worth more than $200,000. ... read more
Everyone has debt
Mary and Martin Pearsall have lived frugally, saved regularly and
invested wisely in their 30 years of marriage. They've also managed to
avoid the kind of crippling debt that can spoil the best-laid
retirement plans. They steered clear of credit cards by living within
their means, and they've dutifully paid the mortgage on their $250,000
Colorado Springs house. They now owe just $64,000. ... read more
A million dollars will cover you
A million dollars has long been the retirement portfolio gold standard,
and why not? That's a rich sum. But let's get the bad news out of the
way quickly. If you earn six figures and have no intention of living on
an austerity budget when you stop working, you may need far more than
$1 million to support yourself for the rest of your life. ... read more
Boomers will crash the market
Here's why that's not true. Stock ownership is extremely
concentrated among the very highest income brackets - those in the top
10% hold 68% of financial assets, according to a 2006 study by the
Government Accountability Office. These wealthy investors are unlikely
to be so strapped for cash that they have to sell their shares in a
hurry. Instead, says George Walper, co-author of "Get Rich, Stay Rich,
Pass It On," ... read more
Without a pension you're doomed
The truth is, the defined-benefit pension was never a fabulous deal
for most workers. Because the traditional pension is designed to reward
longtime employees, the size of the pension depended in large part on
how long you stayed with your employer. So if you switched jobs a few
times during your career, as most people do, you lost most of the
benefit. ... read more
Social Security won't be there
It will be around in 2081, just not enough, unless we raise the payroll tax percentage. For the average retiree, Social Security currently covers only 39% of
pre-retirement income; and if you earn more than the maximum taxable
amount ($97,500 this year), Social Security will replace just 26%, on
average, of the income you earned on the job. And those percentages
will drop over the next 20 years to 33% and 20%, respectively. ... read more
Your house can finance retirement
The best way to look at your house is as a place to live, not a
retirement account. So in the years leading up to retirement, don't
overinvest in it with the idea that you can get that money out later.
Keep your mortgage and other housing expenses to no more than 28% of
your income, and don't prepay your mortgage instead of saving for
retirement. ... read more
You're to old to start saving
Okay, it would have been better to start saving early, but let's face
it: Most people don't. Still, there's hope for late starters (even
those starting at 50). A few years of serious saving can make a huge
difference to your quality of life in retirement. ... read more
Short-term market swings don't matter
Not necessarily. When you're far from retirement, you can tough out
even devastating bear markets, buying low while you do. Once you near
your quit date, the rules change. Say you were within a few years of
retirement in January 2000, on the eve of the March 2000 to October
2002 meltdown, when stocks plunged 44%. ... read more
Top priority is the kids' college
A recent survey by the College Savings Foundation found that 53% of
parents consider college savings their top priority, ahead of
retirement or a house. Problem is, this kind of thinking can lead you to pass up a big weapon: the power of compounding over time. Save
$100 a month from age 25 to 35, then stop and let the money grow.
You'll have $182,000 in 30 years. Wait until you turn 45 to start
saving and you'll have to put away $315 a month for 20 years to end up
with the same amount. ... read more
Decent savings plan = early retirement
You need a portfolio big enough to support you for some 30 or 40 years.
You won't qualify for Medicare until age 65, and full Social Security
benefits don't kick in until at least age 66. The only way to pull off
this feat is through prodigious saving - at least a third of your
take-home pay. Not a bad idea, especially with four out of 10 workers forced to leave their jobs sooner than
planned because of layoffs or health problems or to care for an ailing
relative, ... read more
You're bound to mess up your 401(k)
Not so much anymore. Now an increasing number of plans will give you investment advice or
even account management. And when you start a job, your plan sponsor
may automatically enroll you in the 401(k), raise your contribution
level each year and direct your money into diversified investments,
such as life-cycle or target-date funds, unless you opt out. ... read more
