Podcast Episode 271: Busting Financial Myths

When we meet with people for the first time or talk with someone about retirement, we often hear many of the same assumptions about what they’ll need or what they should expect.

The reality is that many of these retirement beliefs and ideas are actually myths. There might be some truth in what we talk about on this show, but none of these things can be assumed about retirement.

The first myth we tackle is the idea that shifting from stocks to bonds removes the volatility from your portfolio. People believe stocks are for growth so that’s where the risk money goes while bonds are for safety. But just take a look to what’s happened this year.

Bonds are impacted by interest rates and inflation rates so it hasn’t been a safe place to be in 2022. We’re not saying you shouldn’t use them, but you certainly need to know what you need to own. You might be changing your asset allocation, but you’re not removing the volatility.

Our next myth addresses life insurance and the need for it in retirement. There’s different types of needs for life insurance throughout the course of one’s life. Early in your career, life insurance can protect your ability to save money since you don’t have as much. But as you get older, you might not need it anymore to replace your income. However, life insurance could be a good tool for tax planning purposes or for leaving money for your kids. So it might not be a need for every retiree, but it can still have a purpose in retirement.

Another myth that people like to lean on is that you won’t need as much income once you’re retired. The assumption is that you won’t spend as much money on things like gas and close since you’re no longer going into work each day. The reality is that people want to do a lot in retirement and it often ends up requiring more income. Plus, you need to factor inflation in and assume that your current income won’t go as far in 15 years.

Another common assumption is that you’ll be in a lower tax bracket in retirement, but that’s not always the case. It’s enticing to think that you’ll be able to live off your cash and paying very little in taxes, but the deeper you get into retirement and are forced to take money out of retirement, the tax man will come calling.

The last myth we bust on the podcast is the idea that it’s much easier to handle financial planning on your own now because of the improvements in technology and the access to information. While there are robo-advisors out there and other websites that can show you how to do things, but how comfortable will you be without that personal relationship and the ability to have a conversation with a professional. There’s much more to it than plugging in a few numbers and developing a plan.

If you’re approaching this age and want to get a jump on these items, take advantage of our Money Map review to get the process started.

2:05 – Shifting from stocks to bonds removes volatility

3:25 – Life insurance is no longer necessary in retirement

4:40 – You’ll need less income while you’re retired

6:53 – You’ll be in a lower tax bracket when you retire

8:23 – Financial planning today is much easier to do without a professional