4 Harmful Myths About Saving for Retirement

Retirement planning is a complicated subject. After all, you're trying to save enough money to last for the rest of your life. That requires estimating how much money you'll need, deciding how much to save per month, and figuring out the best retirement accounts to use.

As a personal finance writer, I see a lot of myths about saving for retirement. Here are the most harmful ones.

1. You can't save too much

Yes, that's right. The popular expression that "you can't save too much for retirement" is a myth, and it's more damaging than many realize. Some people focus so much on their retirement savings that it negatively affects their quality of life in the present.

Not saving enough for retirement is certainly the more common issue. But it's also possible to go too far in the opposite direction. If you get stressed about spending money on yourself because you'd rather put it toward your retirement, that's not good, either.

It's better to balance saving for the future with enjoying the present, instead of sacrificing one for the other. Find a reasonable amount to save for retirement, such as 10% to 20% of your income. But also allow yourself some fun money, so your life doesn't revolve around retirement planning.

2. It's too late, or too early

These are opposite issues, but they lead to the same problem: not setting aside money for retirement because you think the time isn't right.

Some people think it's too late. They reach 35, 40, or 50 with nothing saved, and they don't see the point of getting started at that age. Young adults, on the other hand, often aren't interested in saving for a retirement that could be 40 or 45 years down the road.

It's beneficial to save for retirement at any age. If you get started when you're young, your money has more time to grow, which makes a huge difference. It's also never too late to start saving for retirement. Practically everyone wishes they started when they were younger, but no matter how old you are, the money you save will help when you decide to end your career.

3. You need to wait until you're eligible for Social Security to retire

I was one of those people who didn't save for retirement in my early 20s because of how far away it was. It seemed like you had to wait until your 60s, when you were eligible for Social Security, to retire.

The FIRE (financial independence, retire early) movement changed my perspective. I learned about people who saved enough money to retire in their 40s or 50s. It made me realize that you can retire when you're financially able to do so. You don't need to wait until you're old enough to get Social Security. That's just what most do because it's the only way they can afford to retire.

Early retirement isn't right for everyone, but it's helpful to realize that you have some control over when you retire. It doesn't have to be when you're 65 or 70.

4. There's always an early withdrawal penalty with IRAs and 401(k)s

IRAs and 401(k)s are tax-advantaged retirement accounts. They offer tax benefits you don't get with regular brokerage accounts. The tradeoff for the tax savings is that you need to wait until age 59 1/2 to make withdrawals, as there's a 10% penalty for early withdrawals. But there are exceptions. Here are a few examples:

• As a first-time home buyer, you can withdraw up to $10,000 from a traditional IRA without penalty to purchase a home.
• In some cases, you can take a hardship distribution from your 401(k) or IRA to pay medical bills.
• Early IRA withdrawals can be made penalty free for qualified education expenses.

It's normally best to avoid early withdrawals from your retirement accounts so your money can continue to grow. But it's good to know about the exceptions, just in case.

Retirement planning doesn't need to be stressful or difficult. What's most important is getting into the habit of setting aside money for retirement every month. If you do that, and if you invest that money in the stock market, you'll grow a nest egg you can use during your golden years.