The idea of saving enough for retirement can be daunting. How much do you need? Will it be enough? "When it comes to financial information, there is a lot of content out there," says Lule Demmissie, managing director of investment products and retirement for TD Ameritrade. "Everyone seems to have an opinion when it comes to money. The key is differentiating good sources from those that could be detrimental to your long-term goals." In addition, always keep in mind that an opinion is just that, an opinion, and it does not foretell the future.
Is misinformation holding you back from your ideal retirement? We've debunked these five myths to help you plan for your future:
Myth #1: A 401(k) is All I Need.
According to a TD Ameritrade survey, 71 percent of working Americans have a 401(k) because it's easy and many can take advantage of an employer match. But a 401(k) may not provide enough funds to accommodate your retirement plans. Consider a traditional or Roth IRA, which provides a tax reduction, or opportunities for tax-free growth, respectively.
Myth #2: I Have to Fund My Child's College Tuition. Saving for Retirement Can Wait.
On average, people are living longer and need to save now more than ever for retirement. If you are funding things like your child's tuition or living expenses after college instead of your retirement account, you could be jeopardizing your savings. These can be difficult commitments to balance, but you owe it to yourself to think about your retirement.
Myth #3: Assessing Retirement Takes Too Much Time and Too Much Work.
TD Ameritrade has found nearly half of those with a 401(k) do a quick check of their portfolios every few months. Assessing your retirement during tax time can be more efficient when you make an appointment with your financial advisor, since they have your documents on hand already.
Myth #4: I Need to Pay Off My Debt First.
While paying down debt is important, saving early for retirement is just as critical. Waiting even a few years can cost you the benefits of tax-deferred investing, given the tax treatment of various retirement accounts. So it's important to consider the interest savings earned by paying off a debt vs. the potential investment earnings (and for that matter, possible losses) realized by saving or investing for retirement. Something to consider: Are there other things you could cut back on in your budget to make room for both debt and savings contributions?
Myth #5: It's Too Late For Me to Save For Retirement.
Contribution limits for some retirement vehicles increase as you get older. If you're feeling like you missed the boat, reassess and see how you can keep working toward the retirement you want. It's never too late to add to your retirement fund and invest in the future.
It can be difficult to sift through the mountain of information available about retirement, so it's important to do a little research and make your own decisions. Ultimately, you're the one determining what your retirement should look like.
Setting financial goals today is one way you can help keep your retirement plans on track.