- Financial planners say there’s some common money advice they tell clients to ignore.
- They recommend not sticking rigidly to your financial plan and allowing flexibility as needed.
- They also advise clients not to take Social Security too soon and to invest their excess cash.
- Read more Personal Finance Insider stories.
Over the last few years, I’ve reorganized my financial plans and created a strategy to make sure I’m paying attention to my financial decisions every day. Since I don’t have a financial background (I majored in poetry in college), I found myself seeking advice from many different sources. I’ve asked friends and family for their best advice, reviewed blog posts and websites, and even asked a handful of financial advisors for their best advice.
I am constantly overwhelmed by all the knowledge I consume and it makes me wonder: What advice is worth discarding and what is worth following? That’s why I recently asked four different financial experts about the common money tips they advise their clients to ignore. This is what they said.
1. Rigidly stick to your plan with no flexibility
While having a financial strategy is important, financial planner Adam Deady says there are times when you need to adapt and change it.
“You have to be disciplined when it comes to your financial habits, but if your situation changes, your plan may need to change or evolve as well,” says Deady. “Say you’re out of a job or have had your hours cut. Building an emergency fund should be an immediate priority for reallocating funds. Or say you have a child. College funding can come into the mix as another priority.” Financial plans are meant to have a strong foundation from which to build and evolve.”
2. Claiming Social Security too soon
I rarely think about Social Security and the age at which I’m going to tap into that resource, but financial planner Sarah Lewis recommends ignoring the advice that it’s best to claim your Social Security benefits as soon as you’re eligible if you’re nervous that the bottom is going to break.
“Even if the trust fund is depleted, most Social Security benefits are paid out of ongoing employee and employer payroll taxes,” says Lewis. “The cost of claiming early is substantial, roughly a 32% cut or potentially $1 million in lost benefits over a long life. Instead, claimants must wait until age 70 to claim and benefit from a higher amount ( from which future costs of living will be adjusted) will be made) if they are in good health and expect to live past 80. Of course, cash flow is also important, and a little advance financial planning can go a long way. Useful”.
3. Having too much cash on hand
Every time I notice my savings account balance growing, I wonder if I should keep the cash or put it somewhere else. Financial advisor Ryan C. Phillips says a big misconception clients have is that cash is king.
“Too often, people have gotten used to the idea that having a lot of cash is valuable,” says Phillips. “Actually, this couldn’t be further from the truth. With interest rates rock-bottom at your bank and inflation higher for everyday goods and services, now more than ever, having too much cash is actually putting you further away from its objectives. .”
Instead, consider putting your money in the market, whether through a brokerage account, retirement account, or otherwise, if you won’t need it for years to come. That way, you can let it grow at a (hopefully) higher rate than inflation.
4. Choosing the wrong retirement plan
When it comes to strategizing a plan for your financial future, many people have different advice. Scott Stanley, a financial planner, advises clients to avoid a common tip when it comes to their retirement plan.
“Don’t listen to the advice that when you retire, withdraw from your taxable savings account until it’s depleted, then move into your tax-advantaged accounts (like IRAs),” says Stanley. “When crafting the perfect strategy, you’ll want to build the most effective withdrawal balance, which could mean withdrawing from your IRA now to reduce your future exposure to higher
while knowing your current income and tax bracket thresholds.