There are so many myths and misconceptions about personal finance and retirement planning that it can be difficult to decide what advice to follow. After all, it’s not easy to make decisions for your future if you don’t have all the information you need.
The truth is, there is no one best retirement plan that everyone should follow. There are so many variables to consider, and there are still so many things in your life that could suddenly change. There’s no way to predict where local and international financial markets will be in the future, either—making it even more difficult to figure out your investment plans.
When it comes to personal finance, you need to have a handle on the basics. It would also be beneficial to clarify these four retirement planning myths:
Myth #1: It’s Too Early to Think About Retirement
The most common misconception about retirement is that you can put it off for as long as you want. This is simply untrue—it is never too early to start saving for retirement.
When you first start in the workforce, it’s easy to plan your life around spending your hard-earned salary. You’re working hard—and you deserve to be rewarded for it, right? No one can blame you for thinking that way, but it’s not a sustainable attitude.
The power of compounding interest is the most powerful tool you have for financial security. The earlier you start setting aside money for your retirement, the more time it has to grow and grow. Start with saving 5% to 10% of your salary every month. If you start in your mid-20s, that’s nearly 40 years of growth, resulting in a healthy nest egg for your future.
Myth #2: It’s Too Late to Start Saving
The converse of myth #1 isn’t true, either. Even if in your 40s or 50s, it is not too late to start planning for your retirement. Spending just 5 to 10 years of lowering your expenses and saving aggressively can make a huge difference in your retirement balance.
Don’t be tempted to take on risky investments in an attempt to catch up on savings. Get-rich-quick schemes are mostly scams, and higher returns mean there’s a much higher risk of loss. Remember: slow and steady wins the race.
Myth #3: I Can Just Keep Working After 60
The average age for retirement in Australia is around 65 years old. With worldwide life expectancy going up to 80 years and older, you will be spending an average of 15 years in retirement.
Many people are blasé about their financial future because they figure they will still be able to work at least part-time even when they’re 60. While this will likely be true, you cannot hinge your retirement plan on this vague possibility. There’s no way to ensure that you will be healthy enough or interested enough to keep working in your twilight years!
Myth #4: I Won’t Have Too Many Expenses After Retirement
Many people underestimate their retirement needs because they assume that they won’t be spending much at all when they’re much older. Some even hang all their hopes just on their future pension.
Again, this is unrealistic because you cannot predict how your life will turn out. A serious medical issue for you or anyone in your family or any other unexpected expense can immediately put you in debt. There’s also inflation to keep in mind—in 30 to 40 years, $1,000 won’t get you as far as it does today!
Conclusion
The future is unpredictable, so if you’re reading this and you aren’t already setting aside money for retirement, you should start now. Keep these retirement myths in mind as you start planning today, so you will have much less to worry about in the future.
Are you looking for a financial advisor on the Gold Coast to help work out your retirement plans? New Wave Advice is a young, dynamic, and forward-thinking financial advice firm. We pride ourselves on ensuring great value, excellent service, and even better outcomes. Book a free consultation with us today!
