As you save up for retirement, whether that’s still 30 years away or only a few years down the road, it’s important to understand how to make the most of your money.
However, as you save for retirement or prepare for the next phase of your life, there’s a good chance that you’re following advice that might not actually help you along.
Before you jump on the bandwagon, here are three retirement myths you can ignore.
1. Your Best Results Come if You Put off Taking Social Security Until You’re in Your 70s
We hear all the time that you should plan to avoid taking Social Security until you’re in your 70s. The truth is that you will get a bigger payout the longer you wait.
However, that doesn’t always mean that’s the best choice for your situation. In some cases, a lower monthly payout makes sense, especially if you’re ready to retire earlier and you need the income.
On top of that, there are other considerations, including the size of your retirement nest egg, the type of RMDs you’ll end up with, and other factors. While some people benefit by putting off taking Social Security benefits, there’s no guarantee that you’ll be one of them.
Instead of assuming that you should just wait, sit down with a financial or retirement expert who can help you understand the implications of different scenarios and who can help you put together a plan that allows you to make the most of all your retirement resources.
2. If You Help Your Kids with College, You’ll Destroy Your Retirement
One of the most famous financial sayings is, “There are loans for school, but not for retirement.”
Unfortunately, many people take this to mean that they shouldn’t help their kids with college. While you don’t want to put your retirement at risk for your kids’ schooling, you also don’t have to assume that it’s an either-or situation.
First, figure out how much you need to set aside for retirement. You can use our Wealth Calculator to figure out how much money to set aside each month to reach your retirement goal.
Next, once you’ve got your retirement under control, you can put money toward your child’s college without causing problems. You might not be able to do everything for your child’s college, but you could reduce their need for loans.
Don’t assume that you can’t work on both. The great thing about financial goals is that you can work on multiple goals at once. Yes, you want to make sure you’re set for retirement, but you can also work toward other things that matter to you.
Look for ways to invest in multiple goals at once. Set up different accounts for different goals so that you can keep everything straight. As you go along, you might be surprised at how much you can accomplish when you invest your assets.
3. Ditching the Lattes will Leave You a Millionaire
It’s nice to think that you can cut out one thing from your life and it will almost-magically leave you a millionaire. To some degree, the choices you make do matter. Investing money instead of making a lot of unnecessary purchases can lead to a better retirement.
However, it’s also important to cultivate the right mindset about your money. Getting rid of a daily latte or not getting avocado toast doesn’t address some of the real issues facing us.
Ditching the latte doesn’t address the issue of generational poverty or the racial wealth gap. The fact that people of color with good credit often end up paying a higher mortgage interest rate (and therefore thousands more when they buy homes), can’t be offset by giving up your latte.
Instead, bigger measures might need to be taken in order to overcome the realities of the situation. You might need to focus more on how to manage the bigger expenses — while still enjoying that latte on occasion.
Putting money away for retirement is a big deal, and it’s important to make sure you’re setting aside money for the future. However, there are some myths that might be holding you back.
Realize that developing a positive money mindset and looking for ways to put your money to work for you can make a big difference in how much money you end up with.
Don’t assume that just cutting certain expenses is enough. You need to look at your finances holistically and consider your goals. Find ways to make the most of your money, and create a plan that allows you to tackle more than one thing at a time.