Retirement Myths

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:

Fearing the American worker is being left in the dark, Mr. Morris, a fee based Investment Advisor Representative with Raymond James Financial Services, Inc., helps 401k participants get the most out of their retirement plan.