The Biggest Financial Planning Myths I See (and What Actually Matters)
Financial planning is full of rules of thumb and widely accepted “truths.” While some contain a kernel of wisdom, many can lead to costly mistakes when applied without context.
Below are three of the most common myths I encounter — and what individuals and families should consider instead.
Myth #1: Everyone Needs Life Insurance
Life insurance is often a cornerstone of financial protection. For families who rely on earned income, the loss of that income due to death can be financially devastating.
However, not every policy is structured effectively.
I frequently see:
- Policies that are unnecessarily expensive relative to the benefit
- Permanent insurance solutions used when term coverage may provide more protection per dollar
- Insufficient coverage, such as relying solely on employer-provided benefits (often ~$500,000) when a family may realistically need $2 million or more
The right coverage depends on income replacement needs, debts, future education funding, and long-term family goals.
The objective isn’t simply to “have life insurance” — it’s to have the right coverage in the most efficient form.
Myth #2: There Is One “Correct” Age to Claim Social Security
Few topics generate stronger opinions than Social Security claiming strategies.
Some advisors recommend delaying benefits until age 70 in every scenario to maximize lifetime payments. Others claim benefits as early as possible because they believe they should “get their money back.”
Neither approach is universally correct.
Key considerations include:
- Longevity expectations and family health history
- Retirement income needs and timing of large expenses
- Market conditions and portfolio withdrawal strategy
- Spousal and survivor benefit planning
Claiming at age 62 can reduce benefits by roughly 40% compared to full retirement age (67 for those born after 1960). However, delaying benefits is not always optimal if income is needed earlier or health considerations suggest a shorter time horizon.
The best strategy balances math with real life.
Myth #3: A Complex Portfolio Is a Better Portfolio
Many investors believe sophisticated strategies and frequent changes lead to better results. In reality, complexity often introduces:
- Higher costs
- Greater tax inefficiency
- Behavioral mistakes
- Increased difficulty in maintaining discipline
While advanced strategies have their place, most long-term investors benefit from a clear, diversified, and disciplined approach.
Trying to time market movements or chase the latest investment trend can create unnecessary friction and reduce long-term returns.
As a colleague once put it:
“Money is like soap — the more you play with it, the less you have.”
It’s a simple reminder that patience and consistency often outperform constant tinkering.
Final Thoughts
Financial planning isn’t about following blanket rules. It’s about making thoughtful decisions tailored to your life, your goals, and your priorities.
What works for one family may not be right for another.
Clarity, efficiency, and intentional planning matter far more than financial myths or one-size-fits-all advice.
If these topics hit close to home, we welcome you to schedule a 15-minute no obligation call to see if we can answer any questions you’re thinking through and if we may be able to help in other ways:
