Most people aren’t experts on retirement, so it’s understandable that they have some misunderstanding about retirement finances. This article reviews some of the more common misunderstandings people have about their retirement finances, and explains how they can lead to trouble.
High Yield Is Better Than Low Yield
Well duh. How can 5 percent interest not be better than 1 percent? Simple. 5 percent is riskier than 1 percent, even if you cannot see why it is riskier.
One of the worst years for long-term treasuries that I’ve seen in my career was 1994. The pristine credit quality of the U.S. Government didn’t keep long-bond prices from sinking over 20 percent. So much for preserving principal through conservative investments.