Fidelity Investments has compiled 9 financial myths that have endurance. They stick to our skin like a brother-in-law during the holidays. 9 popular beliefs that have no real foundation. This year if he is not too “pompette”, so nail him with his replies well sent …
All debt is bad
For example, borrowing money to make an investment is even a good idea, because interest can be deductible. In addition, they are generally very low, compared to those of credit cards.
It’s not worth saving if we can not set aside 10 to 15% of our income
Fault. Of course, the ideal situation requires a savings rate of between 10% and 15% of income. If it’s impossible to reach such a percentage, just make less. The goal is to gain the habit of saving. Running a marathon is an insurmountable goal if you do not cross the first kilometer.
Stock markets are too risky. It’s better to invest in 100% safe products. Risky, really? In the long term, stock markets are known to generate returns above inflation. At the time of going online, capital-guaranteed products yielded little more than 1% per year, about as much as the rate of inflation. In such a context, the purchasing power eventually crumbles. That’s why the money that sleeps at the bank can be safe, but it’s not immune to risk.
I save first to buy a house and an RESP for my children. Then I will think about planning my retirement. Bad reasoning. There are products and programs that encourage the purchase of a home and the funding of children’s post-secondary education. Consider the Home Buyers’ Plan and the Canada Education Savings Grant. But aside from the RRSP, there is not much money for retirement. Fidelity recommends starting with accumulating for retirement before prioritizing other projects.
Public plans will finance my retirement
Yes, but state support will be slim. If you retire at age 60, public plans will only replace 18% of your working income. If you take it at age 65, this rate will increase to 48%. To live a comfortable retirement, you must have other sources of income.
Retirement, I’m too young
Here is a big myth to shoot. Why do young people have to think about their retirement today when there is so much more to do? For two reasons. First, time plays in their favor. The more they save early, the more time their retirement capital will have to grow. Then, as we have just seen, public plans offer limited financial protection. A person who wishes to retire by relying solely on the Quebec Pension Plan and the federal Old Age Security pension exposes himself to living his old age in poverty.
My parents have never been concerned about their retirement. Why will I be? Because times change. At the time, our parents worked for employers who offered generous “pension funds”. This is no longer the case today. In Quebec, just 40% of workers participate in a supplemental pension plan. The others (the majority) must rely on public plans and their own savings if they want to live an acceptable retirement. Hence the crucial importance of starting early to save money.
I do not have money to invest
Really ? Even if you only have a few dollars available for each pay, it is worthwhile to put them in an RRSP or a TFSA, for example. Companies offer pension plans in which they pay a contribution equal to that of their employees. This is a powerful incentive to save (even a few dollars per pay) for retirement.
They say I must have more than $ 1 million to pay me a pension.There is no magic number about the retirement capital you have to raise. Your retirement savings amount depends on your current financial situation and future plans. Your advisor can easily calculate the amount that will meet your needs and establish strategies for doing so.