It’s never too early and never too late. Here are a few retirement myths to start busting right now! Retirement planning myth articles might not be at the top of your weekend reading list but this one will take you less than three minutes to read and it could save you a lot of financial pain later.

Six Retirement Planning Myths

Myth #1. When I retire I won’t need as much to live on.

Hogwash! How do you know what the cost of living is going to be? Sure the kids are off on their own and the house might be paid off but medical bills and cost of living are unpredictable. You should be able to live on less but why would you want to?

Myth #2. I’m a young pup and retirement is far, far away!

Get real dude, time flies when you’re having fun and burning mun. Of course it’s much easier to save a measly $29 a week at 34 than it is to save a whopping $240 at 54! That’s about what it’s going to take to have $200k in the old nest egg at 65. So there you have it. You can do it the hard we or the easy way. You decide oh youthful one!

Myth #3. My adorable children will take care of me.

Whoa! Haven’t you been watching TV? Your kids are more likely to move back in with you than they are to take care of you! Think back a bit… didn’t you preach to your kids about personal responsibility and good old independence? Keep your kids in your life but keep them out of your retirement planning.

Myth #4. I’m counting on social security to save my bacon!

Yeah, that will be the day when pigs fly. Uncle Sam hasn’t figured out if there will even be any social security in another decade or two. If you want to hold onto a weak retirement strategy then just count on Uncle Sam to be there with that retirement check when you need it. You are better off counting on your own discipline and resourcefulness. You can start drawing social security at 62 but depending on your age, you might be better off to consider that as a bonus than a sure thing.

Myth #5. I don’t have enough money to save or invest for retirement.

That might be true but then… maybe not. Take a hard look at where your money is going. Have you maximized your contributions to your 401(k) or other employer-sponsored retirement plans? Have you considered leveraging your home equity or other under-performing assets into safe and secure investments? Have you scrutinized your spending habits? Do you really need that satellite dish and 500 channels of mind numbing video? Do you really need the newest and shiniest shoes and chicest Chevy’s? Even if you can only save a small amount each week, start now. Be consistent and automatic with savings and investing. You might never feel like it’s enough but that is no reason to not to start.

Myth #6. I can’t afford a financial planner.

Many financial planners are compensated by the companies they represent and therefore charge nothing to you unless you do business with them. Others charge for their time on an hourly or fee-based schedule. Find someone you trust and get references. Take your time, go slow and do a little homework. Retirement planning is all about the future but it needs to start today.

Many of you are in the red zone right before retirement, or you’ve already retired. No doubt your number one fear is running out of money in retirement. You’re part of a very large and growing demographic force: 35 million over age 65, 50 million drawing Social Security and 78 million baby boomers now turning 62. This means the future demand for everything used by the “retirement set” will increase, and “retirement prices” will rise dramatically. Many of you may have accumulated a retirement nest egg in a pension account, will draw a company pension and/or have other savings and investments earmarked for retirement. Where should you keep your retirement money?

If you’re keeping up with economic and financial developments, here’s what you’re seeing: sub-prime credit meltdown that has destroyed housing and is now spilling over into automobile debt and credit cards; highly volatile stock and bond markets; a weak dollar fueling higher prices for oil and other goods; more unemployment and rising inflation; retail sales, consumer confidence and new jobs creation in sharp decline; drastic interest rate cuts by the Federal Reserve to avoid a recession; a money giveaway stimulus package from Washington to prop up the lagging economy; widespread talk of recession and stagflation. These all add up to troubled economic times which should prompt you to review where you have your retirement money.

You’re told the stock market is the best long term, but “long term” has a different meaning in retirement. Didn’t the dot.com stock market meltdown in 2000-2002 send many retirees back to work and prevent others from retiring? Aren’t the current inflation-adjusted stock market indexes below their previous peaks? Regardless, the loud voices of Wall Street and investment companies are advising you to buy now at bargain prices. Are the markets headed higher or is their advice self-serving? Who can forecast the economy or the stock market?

If the stock market craters as it did in 2000-02 and 1973-74, and you lose some of your retirement money, how will you replace it? Since there will be no second chance, I encourage you to think carefully before you commit your money. If you’ve been told that you’ll do just fine over the longer run (generally meaning ten years), make sure you can wait this long for a market rebound. Also remember that a rebound is not certain!

What about fixed rate places like government bonds, bank CDs and money market accounts? These are rock-solid safe unless your greatest fear is outliving your money. Since current fixed rates are lower than inflation, you’ll be losing purchasing power with these choices. The potential loss of purchasing power will only add to the risk of outliving your money. What about real estate, collectibles and non-market investments? These are not only risky but generally illiquid. Before committing your retirement money, ask yourself this question: “How will I handle the worse case outcome?”

There is one savings place that offers an “opportunity” to make an above-market rate of return without the risk of loss if held to term. It is guaranteed by some of the world’s oldest, strongest and largest financial companies. The rate of return is determined by stock/bond market indexes with owners sharing in the upside potential but avoiding downside losses. The worse case outcome is a guaranteed positive rate of return. The earned interest is income tax deferred until actually withdrawn and there is no mandatory age when the money must be used. Additionally, it can be turned into a guaranteed lifetime income that can be started, stopped and stored. What’s more, it offers penalty-free partial liquidity for emergencies and bypasses probate if the owner names a beneficiary. It can be opened for a small or a large amount, and sometimes more money can be added later. There is no law which limits the amount of money that can be placed in it. It is truly a safe place to keep retirement money.

It is maligned by Wall Street and bankers because it competes with their products. The financial press doesn’t like it either – primarily because they are uninformed, misinformed or just plain biased. I’m talking about fixed index-linked annuities that are offered by insurance companies: the same companies that insure your home, live, health, business and other valuable assets. The worse case outcome is a positive, albeit small, rate of return if held to maturity, but there is an opportunity to do much better. Fixed index-linked annuities are not for everyone, but you need to consider them as one of your safe options for retirement money. Where are you keeping your retirement money in today’s uncertain and troubled economic climate? If in risky places, now is a great time to review your options.Shelby J. Smith, Ph.D.

March 2008

Learn about safe money places – check out the Retirement Pros website http://www.theretirementpros.com/ I’m also doing free monthly video seminars online sign up at: http://www.theretirementpros.com/Tele-Seminar-MRM.php

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Taking too much risk with your investment: We all want the highest interest rate possible and the lowest risk possible – unfortunately these are competing objectives. High rates always spell high risk BUT high risk does not always spell high rates. You should know that risk and reward are traveling companions: if you want low risk you’ve got to settle for low rates and if you want the chance of making high rates you’ve got to accept high risk.

Most people work a lifetime to save enough so they can have a comfortable retirement – the last thing in the world they want is to lose their retirement nest egg in bad investments. So why is it that most retirees have all their money in mutual funds, stock, bonds, a diversified portfolio of securities, variable annuities, etc.? All these things carry the risk of loss – yeah I know that “in the long run” you’ll do a lot better than with a safe money alternative. BUT, in retirement you don’t have a long run. A great economist once said, “in the long run we’re all dead”.

In the closing years of the 1900’s and up until 2002 the stock market was roaring upward – would-be-retirees were making loads of paper profits and looking forward to retirement next year. Out of the blue came the dot.com bust and a market meltdown – over the next two years the S&P lost half its value, the DJIA sank like a rock and the poor NASDAQ stocks lost 80% of their value (that’s where most of the dot.coms were traded). Instead of retiring, or continuing to be retired, many “risk taker” had to change plans or go back to work as Walmart greeters, taxi drivers or whatever they could get in the depressed employment environment. Can this ever happen again?

Look around you: sub-prime problems, foreclosures shore to shore, the dollar losing ground at an alarming rate, inflation picking up, real estate activity grinding to a halt, economic recession being mentioned often, bank stocks losing half their value, major corporation turning to China and the UAE for capital infusion to stay solvent, record federal deficits, commodity prices shooting upward and lots more of gloom and doom. I don’t want to be negative…but there are storm clouds gathering and you don’t have an risk umbrella if you’ve put your retirement money in the market.

The first big mistake retirees (or would-be-retirees in the red zone before retirement) make is they have taken too much risk with them retirement money.

What can you do? Find a financial adviser quick if you don’t know how to lower your risk without one. Examine every retirement investment you have and make sure the money you’ll be using in the next 10-15 years is in rock solid saving places like bank CDs (for use in years 1 – 5) or fixed annuities (for use in years 6 – 15). If you don’t like either for-the-first-half-of-your-retirement money, you can continue to keep your money at risk and hope for the best.Putting your money only in short-term bank CDs: Many of you have all your retirement money in 6-months CDs because you want safety and are afraid you’ll need it all very soon. The good news is that you’ve got safety and ready access…the bad news is that this is costing you a king’s ransom.

Generally, the longer you commit you money the higher the rate of interest you’ll earn – that’s why 5-year CDs pay more than 3-months CDs. You should space, or ladder, your money so that it comes due at about the same time you think you’ll need it. Yes, you may guess wrong sometime but the penalty will be a lot less than if you always keep your money short and liquid.

Let’s say you now have $150,000 in short-term bank CDs that you’ve earmarked for retirement. You think you’ll need about $15,000 a year of this money to cover expenses above your Social Security, pension (if you have one) and other income. Here how a CD ladder could work. Put $15,000 in a money market account (can get anytime you want without penalty), $15,000 in a one, two, three and four year bank CD. You now set so that every year for the next five you’ll have access to $15,000 (plus interest which will keep you up with inflation) to cover your needs.

What do you do with the other $75,000? Why not look into a five year tax-deferred fixed annuity? You’ll pay no taxes on the interest you earn in the annuity until you withdraw it (that means triple compounding: interest on principal, interest on interest and interest on money you would have paid in taxes) and you’ll have rock solid safety because your principal and interest is guaranteed by a major insurance company. The same insurance company that insures you home, life, health, business, car and everything else of value. Oh yes, you’ll probably get a much better earnings rate than if you put the money in a bank CD.

Yes, you will lose the opportunity to hit it out of the park with a high flying stock your brother-in-law told you about but you’ll also avoid the risk that goes with that high flying stock. When you annuity matures in five years you an annuitize (take an income) over the next five years or do another 5-year bank CD ladder.

Retirement is a time to keep what you’ve got rather than trying to double or triple your money in a short period of time. But, you can err by being too safe and too liquid with everything in short-term bank CDs. Retirement is also a time to reassess your risk and make sure you can afford the worse case outcome. That’s why money in the market don’t make sense unless you’ve got a lot more money than you’ll need for retirement.

If you think the market can’t turn around and bite you, check out the following links:

www.fool.com/investing/dividends-income/2007/03/21/a-market-crash-is-coming.aspx

mutualfunds.about.com/cs/history/a/marketcrash.htm

finance.yahoo.com/expert/article/richricher/26878For more info on Retirement Planning go to the Retirement Pros at http://www.theretirementpros.com/. Learn more from topics such as “Managing Your Retirement Money”, “Guide to Social Security – How to Pay Fewer Taxes”, “Risk and Reward are Traveling Companions”, “Retirement: Your Greatest Financial Challenges” and more. Free Calculators, eReports and online video seminars each month.