The 6 Types of Retirement Advice You Should Never Listen To
Written by
Greg Garrison, AI Editor
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Retirement planning is an important aspect of financial management, yet it’s often shrouded in conflicting advice.
While some guidance can be beneficial, there are certain types of retirement advice you’re better off ignoring.
Here’s a breakdown of some common misguided retirement planning suggestions and why they may lead you astray.
‘You Don’t Need to Save Much for Retirement’
One of the most dangerous pieces of advice is the notion that you don’t need to save much for retirement. This advice often comes from a place of wishful thinking or misunderstanding the realities of post-retirement expenses. The truth is, retirement can last 20 years or more, and living costs, healthcare, and inflation can significantly drain your savings.
Why It’s Bad Advice
Relying on minimal savings or expecting social security to cover all your expenses is risky. It’s essential to have a robust savings plan to ensure a comfortable and financially secure retirement.
‘Invest Heavily in High-Risk Stocks’
Another piece of advice to avoid is the recommendation to invest heavily in high-risk stocks, especially as you near retirement. While these investments can offer high returns, they come with equally high risks.
Why It’s Bad Advice
As retirement approaches, your investment strategy should shift towards preserving capital rather than aggressive growth. High-risk investments can lead to significant losses, leaving you with fewer resources when you need them most.
‘You Can Always Work Longer’
Some advise that you can simply delay retirement and work longer if you haven’t saved enough. While working longer can help, it’s not a reliable retirement plan.
Why It’s Bad Advice
This advice doesn’t account for unforeseen circumstances like health issues or job loss. It’s better to plan for an earlier retirement and be pleasantly surprised if you can work longer, rather than the other way around.
‘Borrow from Your Retirement Savings’
Borrowing from your retirement savings — taking out a 401(k) loan, for example — might seem like an easy fix to immediate financial problems. However, this is typically bad advice.
Why It’s Bad Advice
When you borrow from your retirement funds, you’re not only losing out on potential growth and compounding interest, but you might also face penalties and taxes. It’s better to find other ways to address short-term financial needs.
‘Delay Saving Until You Earn More’
Waiting until you earn more to start saving for retirement is a common trap. The idea is that it will be easier to save when you have a higher income.
Why It’s Bad Advice
The power of compound interest means that the sooner you start saving, the better. Even small contributions in your early years can grow significantly over time. Delaying savings can result in needing to save much more later in life.
‘Ignore Tax Planning’
Some people suggest ignoring tax planning when it comes to retirement savings. This advice overlooks the significant impact taxes can have on your retirement funds.
Why It’s Bad Advice
Effective tax planning can help you reduce your tax burden in retirement. Understanding the tax implications of different retirement accounts and income sources can lead to significant savings.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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