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Inheritance. (Photos.com)
Inheritance. (Photos.com)

Book excerpt

Nine money myths that hamper retirement planning Add to ...

Excerpted from How Much Is Enough? Balancing Today’s Needs with Tomorrow’s Retirement Goals, 3rd Edition. Copyright (c) 2013 by Diane McCurdy. Excerpted with permission of the publisher John Wiley & Sons Canada, Ltd.

Attitudes may be with us for life, but there are some wrongheaded ideas out there that should be discarded. These are myths that we cling to because they offer some hope or give us an excuse for doing nothing.

Myth 1: “I’m going to inherit.”

Sure. And what if your parents live to 110? Or what if they haven’t set up their affairs properly and most of your inheritance goes to fees and taxes? Even if you believe you’re going to inherit something, don’t count on it, and don’t include your great expectations when you calculate your assets.

Myth 2: “There’s always the Canada Pension Plan.”

Forget the scare stories that government pensions won’t even be there by the time you need them–even if they are, the maximum monthly pension cheque is certainly not much to live on.

Myth 3: “Why bother saving? The government just takes it all anyway.”

Nobody is crazy about paying taxes. But the government has given you a way to save money and save taxes. Every dollar you put into your RRSP (Registered Retirement Savings Plan) and leave there until you retire is a dollar you can deduct from your income tax now. Something is better than nothing, so if you haven’t been topping up your RRSPs, start now.

Myth 4: “I was born poor; I’ll always be poor” or “I was born rich; I’ll always be rich.”

Both rich and poor can use money management skills–the poor to grow richer and the rich to keep from becoming poor. Even if you’ve never had much money and you don’t make much, you can tend it carefully and make it grow. And if you grew up rolling in it, learn not to take it for granted.

Myth 5: “I’ll be fine as soon as: I marry rich/I win the lottery/My ship comes in.”

Hey, you never know. But statistically you have a pretty good idea. Just to be on the safe side, assume that no one’s going to take care of you but you.

Myth 6: “The stock market will make me rich.”

Successful stocks or equity mutual funds over time will probably outperform guaranteed savings, like bonds or CDs (certificates of deposit), but not enough to make you wildly rich. Remember too that any investments carry some risk, and they can go down in value. Lots of inexperienced investors get panicky when that happens. Mutual funds can also come with fees for buying or selling, and those have to be taken into account to determine your overall return.

Myth 7: “This deal guarantees that I’ll get a 60 per cent return on my investment in a year.”

If it sounds too good to be true, it is. There’s a reason that that’s an old saying. No deal can guarantee you huge returns without huge risks. The people who are trying to get your money have put a lot of time and effort into making their deal seem sweet as pie, but they’re likely to leave you with the soggy crust.

Myth 8: “Everyone’s doing better than I am.”

Those people with the yacht could well be in debt up to their eyeballs. And the ones who saw a 550 per cent increase in their penny stock are probably talking about a very small part of their portfolio. You can bet they don’t pepper their dinner party conversation with stories of Doofus Industries, which sank like a stone, taking thousands of their dollars with it.

Myth 9: “I’ll never get old.”

Consider the alternative.

So, having considered the alternative, you’re starting to think that maybe you will be looking at retirement someday. Will it be a time of comfort and enjoyment, or will you spend your golden years worrying that you’ll run out? In the next chapter, you’ll take the first concrete steps toward a worry-free retirement.

Excerpted from How Much Is Enough? Balancing Today’s Needs with Tomorrow’s Retirement Goals, 3rd Edition. Copyright (c) 2013 by Diane McCurdy. Excerpted with permission of the publisher John Wiley & Sons Canada, Ltd.

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