There's a lot of bad advice out there about retirement investing. Some may have started as misinterpretations of research, while others may simply stem from inexperience in a complex field. Regardless, retirement planning is crucial for future happiness: The sooner you've established a plan for what you're going to do, the better off you'll be.
While nothing replaces talking with an expert financial planner, there are a few common myths you can watch out for. Below, members from the Forbes Finance Council share the myths they urge clients to ignore.
1. Use The 'Buy, Hold And Forget' Strategy
The buy, hold and forget strategy can work in raging bull markets where everything is going up together, but what about the risk you’re taking? Managing downturns is more important for most individuals, and can only be accomplished through active management. Markets change over time, and your investment portfolio needs to adjust with it in order to properly manage risk and provide adequate returns. - Seth Allen, Pinkowski-Allen Financial Group
2. Bonds Rise When Stocks Decline
The asset allocations we all use make a bold presumption that when stocks decline, bonds rise, but that really hasn't been true since the early '80s (when those studies were published). In a rising interest environment, bond prices decline, period. Having a one-size-fits-all strategy may not fit you as well in retirement. - Paul Ewing, Prosperity Advisory Group
3. You'll Need Less Money In Retirement
One prevailing myth is the idea that you’ll need 65-90% of your pre-retirement income to maintain your lifestyle. While this might be true for some, it might leave you severely short-handed. For instance, if you travel during retirement, your income needs can be drastically higher than they were during your working years. Don't apply blanket statements to something this unique and important. - Elle Kaplan, LexION Capital
4. Homes And Cars Are Assets
Most people think homes and cars are assets. Unless they’re bringing in money, they are not assets at all. They may factor into your net worth, but that’s it. Assets pay out dividends, regardless of your involvement. So, you need to build assets for retirement. And chances are it will be way more money than you thought it would be. - Ismael Wrixen, FE International
5. Have More Than One Retirement Account
Owning more than one retirement account is not diversification. Instead, keep all your eggs in one basket and watch that basket closely. Work with one financial planner to diversify your holdings properly. Don't try to diversify your financial planners: You'll work too hard and likely earn too little. - Karl Frank, A&I Financial Services LLC
6. You Won't Need Help With Investing
The DIY mentality is the most dangerous! You may not see the immediate value of a professional, but all it takes is one big loss and you'll be scratching your head. A second set of eyes is so important! I don't even do my own investing alone! I may be more knowledgeable than most, but my emotions still come into play as I watch my own money move up and down in the market. - Justin Goodbread, Heritage Investors
7. The '100 Minus Your Age' Allocation Myth
This myth suggests that exposure to stocks should be limited in retirement (e.g. a 68-year-old would limit their portfolio to just 32% stocks). With people retiring earlier and living longer than ever before, this myth is dangerous. Fact is, inflation is the greatest threat retirees face, and stocks have proven to be one of the best inflation hedges available. Most retirees need 70% or more in stocks. - Erik Christman, Oxford Financial Partners