When it comes to retirement planning, the last thing you can afford to do is listen to bad advice. The choices you make now can have a significant impact on your financial future, even if you’ve still got decades before you leave the 9-to-5 behind.
Buying into misconceptions about what you should and shouldn’t be doing to build your nest egg can potentially shrink your savings, so make sure you’re avoiding these retirement myths:
Retirement planning myth #1: Delayed savings is OK
When you’re trying to launch your career and juggling credit cards or student loan debt, finding extra money to put toward retirement may seem impossible. Telling yourself that you’ll get started with saving once you get a raise or land your dream job sounds harmless enough but it’s really an excuse that comes with a high price tag.
The longer you put off saving, the more money you’re costing yourself in the long run in the form of unrealized gains as part of your retirement planning.
Let’s say you contribute $5,000 a year to your retirement fund starting at age 25. Assuming an annual rate of return of 6%, your account will be worth nearly $775,000 by age 65. Now, assume you wait until you’re 45 to start saving that same amount. Using the same rate of return, you’d only have about $183,000 saved once you turn 65.
When you run the numbers, it becomes immediately apparent how much you stand to shortchange yourself by delaying your savings in retirement planning. Even if you can only afford to start chipping in $50 or $100 a month it’s much better than trying to play catch-up later on.