10 Big Financial Planning Myths: What Are You Getting Wrong About Retirement?

Here are 10 of the worst financial and retirement planning misconceptions and easy steps you can take to overcome them today.

Misconception 1: Retirement Planning is All About Your 401(k)

 Having 401k is fantastic and  you absolutely need to save, but it is far from being the only thing you need to consider and it is not necessarily the key to your long-term wealth and security

A financial plan, on the other hand,  is a written document showing all aspects of your current and future income, expenses, debts, and assets that will play a role in your retirement planning. A retirement plan is a detailed roadmap to your financial security now and forever.

How do you get this detailed roadmap? 

Forbes Magazine called the Boldin Retirement Planner a “new approach to retirement planning.” It is an easy-to-use, comprehensive, do-it-yourself planning system.

This tool makes it easy and convenient to create and maintain a detailed and flexible retirement plan. Get started now…

Misconception 2: Money Is More Important than Time

How you spend your time – the kind of work and leisure you do, who you spend time with, and how early or late you choose to retire – are what is truly important.

Time is the key factor if you believe that happiness and fulfillment are the measures of success.  Study after study have shown that how you spend your time is what results in your happiness – not how much money you have.

It is not uncommon for someone to toil away at a job they don’t like in order to save enough money to gain financial freedom.  But it doesn’t have to be this way. Options include:

• Working more for a shorter period of time to get to an earlier retirement
• Achieving passive income sources
• Working less, for potentially less money but more freedom 
• Finding work that feels like play, at perhaps a lower salary
• Spending less now (or in the future) to retire earlier
• Tapping into resources and opportunities beyond savings that can help you achieve an earlier retirement

Use the Boldin Retirement Planner to explore different scenarios for work, passive income, reduced expenses, and more to discover how to best use your most valuable asset – your time.

Misconception 3 : You Don’t Think of ALL Financial Decisions as Retirement Decisions

We make big and small financial decisions all year every year. Do you:

• Get the pumpkin spice latte or make coffee at home? 
• Splurge on the Hawaiian vacation or go camping? 
• Fund college or make the kids get loans?

Your answers to all of these questions and every single financial decision you make will have an impact on your current AND future finances. Every bit of money you spend, save, or earn culminates in your retirement security.

Misconception 4: You Think of Finances as Simply Inflow and Outflow

Think in terms of the lifetime value of your financial decisions rather than simply how it impacts you today.

You have a finite amount of time to create a finite amount of money. That money is used to fund your entire life.  Spending more now, means that you have less to spend later. Creating and maintaining a detailed retirement plan is a great way to visualize and manage your total pool of resources over your entire lifetime.

Misconception 5: Your Savings Are the Most Important Levers For a Secure Future

Your savings are not the only important element of your future security. In fact, savings may not even be your most valuable lifetime asset.

Other factors can be far more valuable than the sum of your savings.

• Delaying the start of Social Security can literally gain you hundreds of thousands over your lifetime
• If you own your home, you can tap your home equity for retirement, gaining you more thousands – if not millions to use for retirement
• Planning to reduce expenses in retirement can dramatically improve your retirement cash flow. (And, downsizing or retirement abroad could also enhance your lifestyle.)
• Accelerating debt payoffs can sometimes be a better use of money than saving into your 401(k)
• Careful tax and retirement income planning can also gain you hundreds of thousands over the course of your life
• Passive income is an increasingly popular strategy for boosting wealth? What’s more, you may want to consider how interesting retirement work can keep you mentally and physically healthier (and wealthier).

There are hundreds and hundreds of inputs that go into creating a detailed and complete retirement plan – and many of these levers will have a higher lifetime value than the sum total of your savings and investments.

The Boldin Retirement Planner has more levers – 250 possible inputs — than any other online resource.

Misconception 6: Financial Planning is Only for the Wealthy

Research finds that written plans may be especially important for people with low- and moderate-income levels. One-third of households with less than $48,000 in annual income with a written plan save 10% or more of income, compared with about one in 10 households in that income range without written plans.

Misconception 7: All Financial Advisors Are Equal

There are many different kinds of financial advisors and the way they are compensated varies greatly. If you want to benefit from the wisdom of a financial advisor, you need to know their qualifications and how they make their money.

Qualifications

Some, so-called financial advisors are actually insurance or investment sales people. They certainly have expertise, but their interests do not always align with your own financial objectives. It is wise to look for an advisor with a respected designation like a Certified Financial Planner®. You also want someone who is willing to act as a fiduciary.

How the advisor is paid

It is fairly common for people to use a financial advisor associated with an investment firm and believe that the advice they receive is “free.” However, much free advice is funded by a fee (an assets under management or AUM fee) you pay for the advisor to manage your money. These fees can really add up and the advice may be tuned toward getting more of your money to manage rather than what is best for you.

Misconception 8: A Financial Plan Is a One and Done Activity

The real trick for more wealth and security is to always keep your retirement plan updated. Your retirement plan should be a living document, and retirement planning needs to be an ongoing process.

There are external factors that may occur through time that impact your finances (stock markets, real estate prices, inflation, etc.) as well as internal factors (like your health and family, goals).

Misconception 9: Medicare Will Cover Most Health Costs After 65

For most people, the biggest overlooked cost is healthcare spending.  According to Fidelity, an average retired couple age 65 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement. This is only slightly less than the lifetime value of the average Social Security income. (The average annual Social Security income is around $18,000. If you were to start benefits at 65 and live to average longevity (another 18 years), your total lifetime payout would be $324,000. This is just $24,000 more than your out of pocket healthcare cost.) And, that doesn’t even include the possibility of funding a long term care need.

The Boldin Retirement Planner helps you account for all of the expenses you might overlook. The system even helps you create a detailed and personalized estimate of your out-of-pocket medical costs and helps you plan for the possibility of needing long-term care.

Misconception 10: The Shift from Saving to Spending Can Be Difficult

Retirement IS the time to spend your money. This is a HUGE perspective shift and something that people find problematic. Figuring out an efficient way to spend your money while making sure that you don’t run out can indeed be tricky.

There are tax considerations, required minimum distribution rules, figuring out how to make your money last as long as you do (no matter how long that turns out to be), growing your money while minimizing risks, and many other considerations. The Boldin Retirement Planner can help you plan and create a holistic retirement income strategy.