Retirement and investing have many similarities, and its very easy to fall for several retirement strategy beliefs that “seem” true. Not all of these are true, so make sure not to fall for these investing myths about retirement.
Myth: When investing for retirement, investment choice more important than how much you actually invest
A recent survey revealed that 66% percent of people surveyed believe that what you invested in, be it stocks, bonds, or mutual funds, were more important than how much you invested.
While your investment choices are important, the amount of money you save has a larger impact on your retirement plans.
Yes, having a diversified investment portfolio does matter. But if you don’t save enough money, even the best investments won’t guarantee a successful retirement.
You have to remember that investment choices have a more pronounced impact when they are extreme, such as an investor trying to play it safe by investing primarily in cash, or a retiree, who is spending from their portfolio, who may be more aggressively invested without any shock absorbers.
Myth: Don’t put your retirement money in stocks, because stocks lose money
Sure, stocks can lose value over time. However, stocks can also generate the highest growth potential over the long term. Inflation doesn’t play nice with cash investments, so having stocks is a nice way of keeping pace. Bonds play a large role in investment portfolios and tend to be the least understood by investors.
It is very important to have a good mix of stocks and bond investments in your portfolio. This helps address different risks and helps provide growth potential and sustain your retirement for decades. While bonds help dampen the short-term swings in your portfolio, stocks fill in the long-term growth potential you need to keep up with inflation and helps keep your money up throughout your retirement.
Myth: Saving 6% of your income yearly is enough to let you retire at 65
Let’s be honest: that’s probably not enough.
Many of us will have their retirements fueled by Social Security benefits and personal savings. Realistically, one should look to save at least 15% of your salary, including member contributions, in order for your savings to carry you through your retirement years.
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