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When you were a kid, your whole world was built on make-believe. But at some point, sheet forts fade into picket fences, and the reality of adulthood sets in.
Of course, growing up doesn’t mean you live and die by just the facts. Myths simply take different forms. Take retirement, for instance. There are all sorts of tall tales out there—and they can either fuel false hope or hold you back altogether.
So how do you build a future based on truth? These four myths are a great place to start.
It’s Too Late to Make a Difference
Sure, compound interest packs a bigger punch the earlier you start saving, but you’re never too old to take advantage of its power to grow your money. You’ve just got to give it all you’ve got and stick with it!
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And age has its advantages. For example, did you know you can make “catch up” contributions if you’re 50 or older? It’s true! Each year, you can put an extra $1,000 toward your traditional or Roth IRAs. For 401(k), 403(b) and 457 plans, you can add an extra $5,500 in 2014 and an extra $6,000 in 2015.
Let’s say you max out your Roth IRA at $6,500 a year from age 55 to 65. After 10 years, you could retire with $110,000–130,000. That may not pay all the bills in retirement, but it’s a six-figure start! Add just five more years to your investing equation, and your nest egg could sing to the tune of a quarter of a million dollars by the time you retire.
I Can Always Work Longer
Recent retirement-readiness surveys show people are planning to work well past the traditional retirement age of 65. Working longer is a great way to boost your nest egg and reduce the number of years you’ll need to live off it. But not everyone is able to stay on the job as long as they expect.
Job loss, health problems or family circumstances often push workers into retirement earlier than they planned. Nearly half of current retirees say they left their jobs before they turned 60.
Don’t delay retirement planning thinking you’ll be able to make up for it by working longer. Start investing early and consistently so that even if you end up retiring earlier than you expected, you’ll have the nest egg you need to live comfortably.
My Kid’s College Fund Comes First
Most parents feel it’s their duty to provide their kids a paid-for college education at the kids’ school of choice. To make it happen, 30% of parents pay their kids’ college expenses from their own income and savings—including their retirement savings.
We know college is important, but there are plenty of options to pay for it. Scholarships, grants, part-time jobs, work study—anything but loans! But the buck stops with you when it comes to paying the bills in retirement. You’re not a bad parent if Junior has to pitch in on his own college fund.
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You must make retirement savings your priority. Once you’re investing 15% of your income for retirement, you can start stashing away any extra money for your kids’ college fund. Until then, prepare Junior for the possibility that he might have to pitch in on his own college education.
I Need a Big Income to Have a Big Nest Egg
Forty-three percent of workers believe they will never be able to save enough money to have a comfortable retirement. Their main concern is that they can’t afford to pay their bills and save for retirement at the same time.
They may be right. If their bills include credit card payments, car payments and student loans, then yes, scraping together anything more to invest for retirement could be impossible. That’s why it is so important to get on a budget, start living within your means, and pay off your debt.
Once the debt is gone, you can put your income to work for retirement. Consistently investing even a small amount each month can give you a nest egg of hundreds of thousands of dollars by the time you retire. So get rid of your debt and start building a secure future!
Debunk Retirement Myths With a Free Consultation
Don’t let misconceptions keep you from reaching your retirement goals. An experienced financial advisor can clear up any confusion and show you how easy it is to build your nest egg. It doesn’t cost a thing to just look at your options.
If you’re looking for a pro you can trust, try Dave’s nationwide network of Endorsed Local Providers (ELPs). Your investing ELP has the heart of a teacher and can put you on the smart track to a future you can feel good about.