What if everything you thought you knew about financial planning was wrong? Many well-meaning people fall victim to common financial myths—some of which could cost them thousands of dollars or even their retirement security. Let’s break down some of the biggest myths and uncover the real truths behind smart financial planning.
Myth 1: The 4% Rule Guarantees Retirement Success
The 4% rule suggests that withdrawing 4% of your retirement savings each year could potentially last throughout your retirement, depending on various factors. Sounds great, right? But what if the stock market crashes early in your retirement? What if you have a major medical expense that forces you to withdraw more?
Example: Imagine Lisa, a retiree who followed the 4% rule without considering market conditions. When the market took a downturn in her first few years of retirement, her portfolio shrank much faster than expected. Because she kept withdrawing at the same rate, she had to cut back on expenses later in life. This example shows why a retirement income strategy needs flexibility—not just a one-size-fits-all rule.
Myth 2: Social Security Is on the Brink of Insolvency
Some people express concerns about the potential depletion of Social Security before their retirement, which may influence their decision to claim benefits early. . But taking benefits too early—rather than waiting until full retirement age or later—can reduce lifetime earnings by tens of thousands of dollars.
Example: Let’s say Joe, worried about Social Security’s future, claims his benefits at age 62 instead of waiting. Because of this, he locks in a permanent 30% reduction in benefits. If he had waited until age 70, he could have potentially received more per month, which could have added up to over $100,000 in extra income over his lifetime. This example highlights why it’s important to carefully consider the best time to claim Social Security.
Myth 3: Financial Planning Is Only for the Wealthy
Do you think financial planning is just for millionaires? Think again. A solid financial plan is just as important for middle-income earners as it is for the ultra-wealthy.
Example: Consider Emily, a schoolteacher. She assumed financial planning wasn’t necessary for her because she wasn’t making six figures. But after meeting with a financial advisor, she learned how to save on taxes, optimize her retirement contributions, and build an emergency fund—all without drastically changing her lifestyle. This example illustrates that financial planning is about making the most of what you have, not just having a lot to start with.
Myth 4: Estate Planning Is Only for the Rich
Without a proper estate plan, your loved ones could be stuck in legal limbo for months or even years. Even if you don’t have millions, a will, power of attorney, and beneficiary designations can save your family from major headaches.
Example: Imagine Sarah, a single mom who assumed her modest savings and home didn’t require an estate plan. When she passed unexpectedly, her children had to go through a lengthy and costly probate process just to access her accounts. A simple will and trust could have helped manage this situation. This example shows why estate planning is for everyone—not just the wealthy.
Take Control of Your Retirement Future
Financial myths can be costly, but the good news is that you don’t have to navigate your financial future alone. Whether you’re planning for retirement, managing debt, or thinking about estate planning, having a partner in your financial security today can help lead to long-term financial stability. Contact us to take the first step toward the retirement you deserve.
The source used to prepare this material is believed to be true, accurate and reliable, but is not guaranteed.
The above hypothetical examples are for illustrative purposes only. Actual investor results will vary. SWG 4243288-0225
