13 Money Lies You Should Stop Telling Yourself By Age 40

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Most of us know what we should be doing with our money. But saving and investing and filling out paperwork is hard, so we tend to make excuses to avoid it.

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By the time you hit 40, rationalizing away your bad money management habits starts to have a serious impact on your financial future (not to mention age you).

Here are some of the top money lies that you should stop telling yourself by age 40:

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1. Debt collectors will stop chasing me once I'm in retirement, so why worry about it?

Think again. Even student loan debt can chase you into retirement. The Treasury Department has been withholding as much as 15% of Social Security benefits from a rapidly growing number of retirees who have fallen behind on federal student loans - five times as many as in 2001.

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2. I can definitely get by in retirement with less income than I'm making now.

Leaving the workforce might help you cut costs in some areas - for example, your pricey commute to the office - but you can never underestimate the cost of aging. "Many studies show that some retirees even spend more in retirement than they did when they were working," says Susan Garland, editor of Kiplinger's Retirement Report. As the years go by, your health-care costs, house-related maintenance costs, insurance, and property taxes are sure to be on the rise.

3. I can always save more by postponing retirement until my late 60s or early 70s.

"More and more Americans say they plan to pay for retirement by working longer, but in reality many retirees end up quitting sooner than planned," says Greg Burrows, senior vice president for retirement and investor services at The Principal.

One third of American workers said they plan on working past age 65 in a survey by the Employee Benefit Research Institute, but more than 70% of retirees said they actually quit before that milestone.

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4. I can always rely on Medicare for my long-term health care needs.

Medicare is an excellent resource for retirees needing health-care support, but here's a wake up call: It doesn't cover all long-term care. Medicare coverage excludes extended nursing home stays, custodial care, or an in-home nurse to help out if you're unable to dress, feed, or bathe yourself.

"Medicare pays for limited nursing-home and home-health care for short periods to provide continuing care after a hospital stay," Garland says. "For example, skilled care in a facility is limited to 100 days. It may be wise to consider long-term care insurance to cover those costs."

5. My nest egg will be safe in a bank account.

Never underestimate the crippling power inflation has over your retirement savings.

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"Too many people have the illusion that money is safe as long as the balance doesn't go down, but the reality is that inflation will eat into your purchasing power unless you learn how to properly manage and invest your wealth," writes David Ning of MoneyNing.com.

6. I'll never learn enough about investing to make a difference in my savings.

Contrary to popular belief, investing savvy isn't something only the rich have. But if you want to invest wisely, do yourself a favor and leave the stock picking and day trading to the professionals.

"Stick to the boring but effective strategy of saving early and often, watch investing fees, and picking an asset allocation plan where you can stay the course when the market inevitably takes a dive," says Ning.

7. Banks and bill collectors will get their way no matter what I do.

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At some time, you may find yourself on the wrong side of your bank or, worse, a debt collector. Stand your ground, and watch them like a hawk.

Sometimes all it takes is a phone call and a little math work to figure out you could be getting a better deal elsewhere. Kenny Golde, a 40-something producer we spoke with, managed to negotiate $220,000 worth of debt down to $70,000 on his own.

8. If I start dipping into my savings now, I'll have plenty of time to make up for it later.

It turns out one in four workers resorts to taking out 401(k) loans each year, to the tune of $70 billion nationally.

"You might be cheating your future self," says Catherine Golladay, VP of 401(k) Participant Services at Charles Schwab. "While paying back a 401(k) loan, many people stop saving in their 401(k) plan, which can really derail retirement savings."

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9. I want to convert my 401(k) to a Roth, but I can't take the tax hit.

We'll never tire of the Roth vs. traditional 401(k) debate. With a Roth 401(k) or IRA, all of your contributions are taxed immediately according to whatever tax bracket you fall into today. Traditional IRAs are tax-deferred until retirement.

The general consensus is that it's better to convert to or start a Roth now, since it's likely that you could wind up retiring a in higher tax bracket, thus risking the chance of paying way more in taxes later than you would today.

But investors who've already built a substantial IRA or 401(k) can't stomach the thought of paying taxes on everything at once if they make the switch. "Sometimes it just takes a lot of handholding because investors don't like to write that check," says Janet Briaud, chief investment officer of Briaud Financial Advisors. "There is sticker shock, but in the long-term, our clients really get it. They're really happy."

10. I'll figure out how much money I need for retirement when I get there.

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Nickel, the anonymous blogger behind Five Cent Nickel, takes a slightly different approach than basing future needs on your current income:

"Start by estimating your post-retirement expenses. Average it out across a year. From there, estimate what sort of investment returns you'll be able to generate - yes, you'll need a crystal ball for this."

"From there, divide that rate (as a decimal) into one to find your multiplier. So, for example, if you think you can generate 4% real returns (i.e., 4% returns after accounts for inflation, so more like 7% nominal returns) then you'll need 25x your annual expenses (1 / 0.04 = 25). If you think you'll only be able to generate 3% real returns, then you'll need 33x your expenses. And so on."

11. Once I get my kids through college, I'll finally start saving for retirement.

The benefit of saving for your children's college education early (ideally via a 529 plan) is that you limit your saving burden by spreading it out over time. But even if you come up short of tuition costs, don't immediately dip into your retirement savings to make up the difference.

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"You can always fall back on financial aid. Grants, scholarships, and student loans can help pay your child's way," writes Learnvest's Laura Shin. "When it comes to your retirement, however, there are no loans."

12. I'd rather kill myself working now so I can rest easy later.

Of course, few people have the benefit of unlimited cash flow without putting in a little leg work first. But there are higher priorities in life than working overtime and depriving yourself of a few pleasures today just to save a buck or two.

"People spend most of their time planning their finances for old age, but not their fulfillment" along the way, says Ken Budd, executive editor of AARP The Magazine. Don't forget about the here and now because you're focused on the future.

13. I have all the time in the world to plan my will.

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Without a plan in place, you could leave your estate's future in the hands of squabbling family members or your state, which would appoint an administrator to handle everything.

"(A will) enables you to start thinking about issues like whether you have the right insurance coverage, life insurance, and ways of replacing your lost income," RocketLawyer founder Charley Moore says.

This is doubly important for gay spouses, as states that don't recognize gay marriages would pass over spouses in favor of next of kin.