Financial myths, mistakes & misunderstandings

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Throughout our financial lives, we may be influenced by myths, mistakes and misunderstandings. Here are just a few:

“I don’t invest because I don’t know much about it.”

It’s time to learn, because a basic understanding of investing concepts can help you make more informed financial decisions.

“Wow, they’ll give me that much credit! I must be able to handle it.”
Just because the credit card company or bank extends a large amount of credit to you, doesn’t mean you should use all of it. The more you borrow, the larger the monthly payments, and before you know it, you’re in over your head. Figure out how much you’ll owe based on the amount you borrow and determine if it will fit within your budget.

“I’m young, I’ll worry about retirement when I’m older.”
Planning for retirement involves saving enough by a desired age to enable you to support yourself without having to work. If you wait to begin saving for retirement, you’ll have to sock more away or put off retirement to a later date.

“I know my finances, I don’t need to write them down.”
You’d be surprised how often we think we know how much we can afford until our bills start to exceed our income. If you write down your expenses and income (e.g., create a spending plan or budget), you’ll know how much you can spend.

“I’ll dip into my retirement account and make it up later.”
First, if you borrow from your 401(k), you’ll likely pay fees and interest. If you take money from a traditional IRA, you’ll pay income tax on the amount you take and possibly a 10% penalty. Remember, these accounts are intended for retirement. Taking money out now increases the risk you might run out of money during retirement.

 “I won’t need as much income in retirement.”
Maybe, but it might be a mistake to count on it. In fact, in the early years of retirement, you may find that you spend just as much monthly, or maybe more, than when you were working, especially if you are still paying a mortgage. And don’t forget to factor in increasing health-care costs.

“The new health-care law cuts my basic Medicare benefits and services.”
Actually, the Affordable Care Act (ACA) mandates that no guaranteed Medicare benefits are cut. In fact, the ACA expands Medicare benefits to include a free annual wellness assessment.

“If I die without a will, the state will get my assets and property.”
This isn’t necessarily true. Each state has intestacy laws, which determine who gets what when someone dies without a will. However, those laws generally deal with assets in your name at your death that don’t have a designated beneficiary or joint owner. If you want to have some say in who will inherit your assets after your death, you need an estate plan, which likely will include a will.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

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