Final Myths

The last of the 10 Financial Myths per the 4/18/08 USA Today article.

Myth 9: I put myself through college by working part time and taking out loans. So can my kids.

Bob put himself through 6 years of college roofing houses in the summers. Until our daughter was 11 or so, he felt strongly that if she wanted further education, she'd find a way. We heard from friends the college was way more expensive than we had imagined.

College costs have risen at a much faster rate than inflation. Most students are relying on loans now. The average graduating senior has $20,000 in education debt. Nearly 10% walk carrying $35,000 or more in debt.

Consider a 529 college savings plan. Most states have these plans and many allow contributions as little as $50. The key is to start when your child is young.

Myth 10: I don't need to save that much for retirement since my living costs will fall a lot once I stop working. In fact, most retirees spend more, particularly in the early years of retirement. Many travel, take up new hobbies, or other things they have wanted to try.

Fidelity Investments estimates that a 65 year old couple retiring this year will need $225,000 for health care expenses not covered by Medicare. Only about 1/3 of retirees expect to have employment-based health coverage during retirement.

Good advice is to save as much as you can and ignore those retirement calculators that suggest you can live on 70% of your pre-retirement income.

'til later