Money myths and
misconceptions.

Certain misconceptions about money can undermine the foundation of even the best-laid plans.

One of the most surprising discoveries in our national Money Myths survey*—conducted in January by independent research firm Lieberman Research Worldwide—was that respondents who believed they were the most knowledgeable were more likely to agree with misconceptions about important financial planning decisions. The results also showed people were often overly optimistic about their financial future—putting them at risk.

*The nationally representative online survey polled approximately 1,000 respondents ages 30–79 with an annual household income of at least $35,000.

Myth: A will is the best way to ensure your property will be distributed the way you want.

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Estate planning: Leaving behind money and property.

Myth: A will is the best way to ensure your property will be distributed the way you want.

(91% of survey respondents inaccurately agreed with this statement.)

Fact: Although a will is essential, it may not be sufficient. If there is a discrepancy between the beneficiaries named on your financial accounts and those named in your will, the beneficiary designations on your financial accounts will prevail.

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Myth: It’s important to eliminate all debt by the time you retire.

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Myth: It’s important to eliminate all debt by the time you retire.

(88% of survey respondents inaccurately agreed with this statement.)

Fact: Not necessarily. It depends on the type of debt as well as your individual circumstances and tax situation. There is “good” debt and “bad” debt. For example, good debt equals lower interest, deductible debt like a mortgage loan. Bad debt equals high-interest, non-deductible consumer debt—from credit cards, for example.

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Myth: Every adult should have life insurance.

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Myth: Every adult should have life insurance.

(More than three in four survey respondents [78%] inaccurately agreed with this statement.)

Fact: Life insurance isn’t for everyone. Among those who most likely need it: people with minor children, those who are supporting other dependents, and small business owners. But if you don’t have dependents, life insurance may be a waste of money.

Myth: You should start taking Social Security as soon as you’re eligible.

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When should I take Social Security?

Myth: You should start taking Social Security as soon as you’re eligible.

(52% of survey respondents inaccurately agreed with this statement.)

Fact: In general, most people leave money on the table because they file too early. File early and you’ll receive a smaller monthly payment for life. File later (generally up to age 70) and you’ll receive a larger payment. To make the best personal decision, it’s important to crunch the numbers.

Myth: You should purchase long-term care insurance when you’re in your 40s or younger.

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Paying for healthcare in retirement.

Myth: You should purchase long-term care insurance when you’re in your 40s or younger.

(Nearly half [49%] of survey respondents incorrectly believe this.)

Fact: The optimal time to consider long-term care insurance generally is between ages 50–65 if you’re in good health. In your 40s (or younger), your annual premium may be lower, but you’ll be paying over a much longer period of time.

Myth: Retirees shouldn’t have their money in the stock market.

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Myth: Retirees shouldn’t have their money in the stock market.

(More than one in three people [38%] inaccurately agreed with this statement.)

Fact: Stocks are an important part of most portfolios. It is often appropriate to gradually decrease the percentage of stocks as you get older, but a diversified selection of individual stocks, or stock mutual funds or ETFs, provides the best protection against inflation over the years.

Myth: If you need cash while you’re still working, a 401(k) plan is a good place to turn for a loan or a withdrawal.

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Myth: If you need cash while you’re still working, a 401(k) plan is a good place to turn for a loan or a withdrawal.

(One in three [33%] of survey respondents believes this. Schwab strongly disagrees.)

Fact: Although there are certain emergency situations that might warrant a loan from a 401(k), this should generally be considered a last resort. Taking money out of the plan can derail your retirement savings in multiple ways. It can also have negative tax consequences and lead to hefty fees if you don’t pay it back.

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Myth: By the time you’re 50, it’s too late to make a difference in your financial future.

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How much do I need to retire?

Myth: By the time you’re 50, it’s too late to make a difference in your financial future.

(24% of survey respondents inaccurately agreed with this statement.)

Fact: It’s not too late. More than one in three people (34%) don’t plan on retiring until after age 70. That means you could have 15 to 20 years or more of saving ahead of you. Additionally, the catch-up provisions in the tax code are designed to help.

Money myths and misconceptions.

Myth: A will is the best way to ensure your property will be distributed the way you want.

Myth: A will is the best way to ensure your property will be distributed the way you want.

Myth: It’s important to eliminate all debt by the time you retire.

Myth: It’s important to eliminate all debt by the time you retire.

Myth: Every adult should have life insurance.

Myth: Every adult should have life insurance.

Myth: You should start taking Social Security as soon as you’re eligible.

Myth: You should start taking Social Security as soon as you’re eligible.

Myth: You should purchase long-term care insurance when you’re in your 40s or younger.

Myth: You should purchase long-term care insurance when you’re in your 40s or younger.

Myth: Retirees shouldn’t have their money in the stock market.

Myth: Retirees shouldn’t have their money in the stock market.

Myth: If you need cash while you’re still working, a 401(k) plan is a good place to turn for a loan or a withdrawal.

Myth: If you need cash while you’re still working, a 401(k) plan is a good place to turn for a loan or a withdrawal.

Myth: By the time you’re 50, it’s too late to make a difference in your financial future.

Myth: By the time you’re 50, it’s too late to make a difference in your financial future.

Money myths and
misconceptions.