Myths and Facts During Times of Crisis
Myth: I am worried about my job and can’t afford to save for retirement in this uncertain economy.
Fact: The COVID-19 pandemic has created challenges in both areas of health and finances. Yet, the U.S. economy is resilient. If your employer offers a 401(k), you should make any contribution possible.
Investing even small amounts add up over the long term due to the miracle of compounding returns.
Your employer matches every contribution, so this is literally free money.
Myth: The markets are too volatile. A market (crash) expert predicts a 10-year depression is coming! Investing now makes me nervous.
Fact: Doomsday naysayers forecasting the end of the world are always circling. If we feel unsteady after such a volatile year so far, that is normal. But our economy always moves forward.
There are many free digital tools to learn about investing and low-cost funds.
Making small, steady, careful investments over the long term creates a path to retirement security and a productive, independent life.
Myth: Retirement savings plans like IRAs and 401(k)s are confusing. All the rules, penalties and taxes seem overwhelming.
Why don’t simpler products exist for people like me who don’t have advisers?
Fact: Universal Savings Accounts (USAs) have been debated here for years.
They address the need for simplicity, ease and flexibility with no restrictions on either the timing or purpose of withdrawals. Savings are taxed only once, at the time of your contribution.
You can invest these funds in any way.
The key advantage is your money is available without penalty or tax when you need it.
This product is not available in the U.S. but has been a success in the U.K. and Canada since 2009 with 40% to 50% of the population owning these accounts. The average income of savers ranges from $35,000 to $50,000.
In order to help Americans save more, we have to make investing easier to understand.
Myth: How can small business afford retirement savings plans for their employees with the COVID-19 pandemic?
Fact: The SECURE ACT passed last year made it easier for small business owners to set up less expensive retirement plans. These are difficult times for many businesses and employees. But for those that keep operating, it is worth asking about these options because employee safety also includes retirement benefits.
Myth: The government protects me with Social Security benefits during retirement years.
Fact: Yes, but Social Security payouts are minimal. The average Social Security benefit in January 2020 was $1,503 per month. The maximum Social Security benefit for someone who retires in 2020 at full retirement age is $3,011.
So, personal savings are critical to maintain living standards and address unexpected costs. It is estimated that unreimbursed health costs over retirement years can total over $200,000. This does not include assisted living or nursing home expenses, which are not covered by Medicare!
Myth: Americans are worried about having enough retirement income, so the best solution is for Congress to expand Social Security benefits.
Fact: This may be a key issue in the 2020 election year. The Social Security 2100 Act —which requires even higher social security taxes — is co-sponsored by almost 90 percent of House Democrats.
However, a recent survey made clear that 74% of Americans preferred enhancing their own personal savings versus 26% favoring paying more into Social Security.
Even among Americans under age 35, a "progressive" group, 81% preferred to save more personally. No one wants to do away with Social Security, but if they are going to place funds into retirement for a longer life, the overwhelming majority prefers a retirement plan own and control.
Myth: The country and economy is in turmoil with virus and political anxiety. Why does the market keeps rising? I might have missed the chance to invest in March.
Fact: Our free markets allow this country to be a consistent job and business creator. The US market is a high quality equity investment. There will always be volatility.
Be prepared for more in this presidential election!
A wise investor stays focused on our productive future. And this administration initiated critical economic policies that helped our country and employment grow significantly.
Quick recovery is now the main goal.
Optimistic signs of the road ahead are large numbers of young millennials entering the market and the many remarkable innovations on the horizon.
We just celebrated the Fourth of July; it's worth recalling some memorable words of Warren Buffett "Nothing can stop America when you get right down to it. Never bet against America."
Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. Her financial industry career included senior roles in Investment Management, Private Asset Management, and Capital Markets. Her entrepreneurial ventures involved digital media as Founder, CEO of The Hispanic Post; energy tech as founder of InEnergy and health tech. She is a former advisor at 60Plus Foundation. Currently, she is a Board Director at General American Investors Co. and Executive Committee of Weill Cornell Women’s Health Symposium. She earned a BSFS at Georgetown University. Read Clara Del Villar's Reports — More Here.
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