Planning for retirement can be complicated. Here, advisors with RGW Wealth Management in Plymouth, help debunk some common myths so we can enjoy our later years in comfort and security.
RGW is an independent financial planning firm committed to help bring peace of mind for families and individuals by managing all aspects of their investments, financial planning, and tax situation.
Myth 1: I’m too young to worry about saving for retirement.
When you’re young, time is on your side. Although retirement may be decades away, the fact is that the earlier you start saving and investing towards your retirement, the less strain it will have on your cash flow/budget and the easier it will be to hit your financial goals. The sooner you start saving, the less you actually need to contribute thanks to compound interest.
Many have probably heard of some version of the timeless tale of two investors – one who started early and one who waited “just a few years.” For example, two investors put away $5,000 each year, invest in the same investments earning 6% annually, and retire at age 67. The only difference is investor one started at age 22 and investor two started at age 32. Investor one will end up with almost twice as much money, or about $500,000 more, walking into retirement!
Myth 2: Social security payments will cover what I need.
While Social Security will provide you with retirement income and may cover your living expenses, it was never meant to be your sole source of income as a retiree. Start by reviewing how much your lifestyle currently costs and whether you anticipate that to change during retirement or not. Grab a copy of your most recent Social Security Statement (sign up for online access at www.ssa.gov/myaccount/) and review your estimated personal retirement benefits. If your monthly expenses are higher than your Social Security benefit, you’ll need to bring income in from other sources to fill the gap. Additional income sources may be received from a pension plan, retirement accounts, side jobs, annuities or other investment vehicles, depending on your situation.
Myth 3: I’ll just keep my money in the bank. I don’t need to invest it.
While it is recommended to keep three to six months of cash in a checking or savings account that is readily available for emergencies, funds sitting in cash are actually going backwards when we look at money as purchasing power and take into account inflation vs. what the bank is paying for interest. For example, if you put $100 in the bank and over the course of the year inflation was 2.2% and the bank paid you .2%, the purchasing power of your same $100 is now only $98. This effect is magnified with the current inflationary environment, and only gets worse over time. Individuals need to invest their money not only to maintain purchasing power over time, but to increase it as well. Most people will never be able to save their way to retirement - they must invest to it.
Myth 4: My spouse is the main breadwinner, makes a good income and saves for retirement, so I don’t have to worry about it.
It may be true. Each relationship has its own dynamics including how financial affairs are handled. If your spouse handles the household finances, make sure you are not putting yourself at a disadvantage. Don’t wait until there is a financial fiasco to start improving your own security. We believe both spouses should be engaged in the financial planning process to ensure they are on the same page. There are many benefits when both spouses are aware of their financial situation and set mutual financial goals together. Couples who do so can more efficiently pursue goals, increase the odds of success by working together, avoid potential conflicts, mitigate risks and hopefully achieve financial peace of mind. Try having regular financial meetings with your spouse and attend financial planning meetings together if working with a financial professional.
Are there any new big planning items people should be aware with recent tax law changes?
There are many planning opportunities to review prior to retirement - before receiving Social Security retirement benefits and before Required Minimum Distributions start. We recommend meeting with a tax-smart financial professional who has the knowledge to help you take advantage of planning opportunities available to you.
How does RGW Wealth Management help people plan for different situations and common scenarios? What is the firm’s philosophy?
Life is filled with many stages and major events, both expected and unpredictable. We believe that creating a well-defined, tax-smart financial plan around those investment and financial goals that are important to you will allow you to enjoy the journey, no matter what comes your way. We focus on understanding your unique situation and designing a plan that aligns with your vision now, and in the future. We then provide recommendations based on helping you achieve your goals so you can fulfill the promises you have made to yourself and your loved ones.
RGWWealth.com.
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"The sooner you start saving, the less you actually need to contribute thanks to compound interest."