Financial Planning Myths

Myth #1:  I need to have some investments before I'll have a need for a financial planner.  

Investing is about one fifth of what financial planning is all about.  Financial planners also give advice about risk management and insurance, income tax planning, retirement planning and estate planning.  And to the extent that you don't reduce your insurance expenses and income taxes and develop the discipline to start saving the amount needed to fund your retirement, you won't have any investments to need advice about.

Myth #2:   My estate won't be subject to estate tax.  

While that will probably be true for the first spouse to die, it may not be true for the second spouse to die, especially if either of you owns a lot of life insurance.  After 2010, the maximum estate tax rate on taxable estates over $1 million will be 55%.  With a little planning, however, this tax is completely avoidable.

Myth #3:  My estate will pass according to my will.

If your will is valid, it will only cover your probate estate.  Jointly-owned property, retirement plans and life insurance proceeds are not covered by your will.

Myth #4:  All of my insurance is in order.

I have yet to meet a client who did not have inadequate limits, unnecessary coverage or inappropriate deductibles.  Additionally, consumers are generally unaware of all the factors that need to be considered for each type of policy.

Myth #5:  I'm saving enough for retirement.

Most Americans aren't, and most underestimate the amount of money they'll need.

Myth #6:  If something happened to me, my family would know what my wishes would be.

Unless you've discussed your wishes with them in detail and put them in writing, chances are they wouldn't.

Myth #7:  Social Security will provide most of my retirement income. 

For 2009, the maximum Social Security benefit for people who retire at full retirement age is $2,323 per month.  Additionally, the system is totally unfunded, and as of 2007, the present value of unfunded liabilities facing the federal government after taking into account all expected future revenue was $90 trillion.  This figure will get larger as time passes and no provision is made to fund promised benefits, especially since these unfunded liabilities are increasing by $300 billion per month.  Additionally, the courts have ruled that you do not have a legal right to the benefits that have been promised to you.  Your benefits are whatever the current Congress and president decide they will be, as limited by what they can afford to spend.

Myth #8:  I don't need to save for my retirement because I'm going to die young.

So what will happen if you don't die young?  What's Plan B?  With advances in health and science, some futurists are predicting that many people alive today will live to be over 100.  

Myth #9:   I can't afford a financial plan right now.  

Perhaps part of the reason you think you can't afford one is because you're paying too much in insurance premiums, income taxes, interest and investment expenses, all of which a financial planner can help you reduce.  And fees you pay for investment advice and tax planning are tax deductible.  Hiring a competent and ethical fee-only financial planner to write you a comprehensive financial plan will probably be the best investment you will ever make. 

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