I don’t believe that money grows on trees, but there are several money myths that I bought into out of pure ignorance. According to a recent article by Forbes about 9 common money myths, I’m not alone. Some of the myths, according to Forbes, are downright “dangerous.” In my opinion, some of the so-called myths aren’t really myths at all as much as a matter of personal opinion and preference. Charles Schwab surveyed almost 1,000 people to learn about the so-called money misconceptions. Most of the respondents thought they were savvy about money even though they agree with the money myths outlined by Schwab.
Being protected by a will
According to Forbes, 91 percent of the people believed the myth that a will would protect a person after he or she dies. The fact is the beneficiaries named financial accounts are more important than the names listed in a will. Knowing that, it’s important for me to update my Roth IRA beneficiary information which may be outdated.
Eliminating debt for retirement
Eighty-eight percent of those surveyed felt it best to get rid of all debt by retirement. However, the Forbes article pointed out mortgages can be considered “good debt.” Since I take the standard deduction, having a mortgage wouldn’t help me lower my tax liability. I can’t fathom how having student loans in retirement would be a benefit for anyone.
Getting a job in retirement
Seventy-nine percent felt they could get a job if they needed to supplement their income in retirement. I agree it’s foolish to count of being hired after a certain age because of the quickly evolving workplace.
Having life insurance
Seventy-eight percent agreed all adults need life insurance when, in fact, it’s designed for people who have children or spouses that are dependent. I don’t plan to carry life insurance once my children are financially independent.
Taking Social Security early
It surprises me that 52 percent of those surveyed though they should take Social Security on their 62nd birthday. I have never considered taking early retirement since it lowers the benefits. I’m content to wait until age 70. Other myths related to old age include buying long-term care insurance before age 50 and having zero exposure to stocks in retirement.
Tapping the 401(k)
Thirty-three percent of those surveyed felt it was fine to tap their 401(k) for cash. I don’t think that taking a loan from a 401(k) is as risky as some experts suggest. Even when I changed jobs, I was able to make monthly payments to my 401(k) loan without any penalty or taxes. I wasn’t forced to pay back the money right away.
I think most financial experts think they have the right answer when, in reality, there is a lot of gray area in the world of personal finances. A person who expects to live to be 100 should wait to take Social Security, but a person with a terminal illness would probably do better to start collecting as soon as possible. The beliefs I have about money now might be true for me at this stage in my life. When I’m older, I’ll have to reevaluate my money beliefs.
More from this contributor:
Being a Credit Deadbeat
Getting Finances in Order Before a Layoff
Cutting up my Dozen Credit Cards