Misconceptions About Retirement Strategies
“There are many ways to implement a successful retirement strategy. One of them is too carefully map out a sensible financial plan and then stick to it through thick and thin. Another is just to wing it, using your intuition and gut feelings, and hope for the best.”
There are way too many people who choose to go with their gut, when planning for retirement. Investopedia’s recent article entitled “Counterintuitive Retirement Strategies” discussed some big misconceptions people commonly believe when it comes to retirement planning.
The first myth is that you should constantly be moving in and out of stocks, timing the market and that a buy-and-hold strategy is really a losing one. However, many studies have repeatedly shown that it is often less risky to hold stocks for longer periods. You know, it is tough to find a 10-year period when the stock market had a negative return. Stocks and real estate are the two big asset classes that have outpaced inflation over time, and-even with a few bearish periods- they’ve slowly gone up in value and will likely continue to do the same. However, that doesn’t mean you can simply fund and forget. Periodically monitor your portfolio and its performance.
Another misconception is that if I don’t sell a losing position, then I don’t have a loss. That is just hogwash. You’re losing money on a declining stock, despite the fact that don’t sell it. You won’t be able to claim a loss on your tax return, if you don’t actually divest. However, the difference between realized and recognized losses is only for taxes. Your actual loss is the same, no matter what is recognized on your tax return.
Myth Number Three is that you can just let your money managers handle it. While professional portfolio management is a good choice in making cases, you still need to be personally engaged in the management of your finances.
Another misconception is that your Social Security benefits will be enough to pay for your retirement years. This is not true. The average monthly Social Security payment for retirees was only $1,471 in June 2019. Benefits vary a lot, but your benefits were never designed to be more than 40% of your pre-retirement wages.
The next myth is that you should put all of my retirement money in totally secure income-oriented investments, especially after you retire. That is not necessarily true. Low-risk vehicles, of course, are more of a priority at this point in your life. However, most retirees should have at least some of their savings in growth and equities in some form, either through individual stocks or mutual funds.
The final misconception is that retirement is a long way away, and so you needn’t worry about it for a while. This is a very dangerous myth, because you’ll be poor and dependent on relatives if you don’t get this straightened out ASAP. It takes time for your investments to grow to what they’ll need to keep you through your retirement.
Call the Trust Doctor (W. Bailey Smith) at (949) 833-8891 (or go to yourtrustdr.com for more information).
Reference: Investopedia (October 21, 2019) “7 Counterintuitive Retirement Strategies” (https://www.investopedia.com/articles/retirement/09/counterintuititive-retirement-strategies.asp)
