Six money myths debunked

There is no shortage of bad information out there—and falling for some of it can cost you money. It could be other people who steer you in the wrong direction, or it could be the things you tell yourself. Whatever the source, believing these myths could be hazardous to your financial health. Get the truth behind these bits of financial misinformation.

MYTH #1: It's not worth saving if I can only contribute a small amount.

IN REALITY: Starting early and gradually increasing your savings amount can make all the difference.

If you start early, around age 25, saving 15% of your paycheck—including UC’s contributions to your primary retirement benefit—could help you save enough to maintain your current way of life in retirement. Starting later than 25? Don’t despair. Beginning to save right now and gradually increasing the amount you're able to put away can help you hit your goals.

Starting later than 25? Don’t despair. Start small for now by saving the amount that feels comfortable to you. Over time, you can gradually increase the amount by 1% a year until you hit your goal. One way to get there is to give every dollar coming in a job.

  • Consider directing the largest percentage of your pay, say 50%, to essential expenses.
  • Over time, try to assign 5% to 15% of your pay for retirement. Remember, UC contributes a portion of your pay to your primary retirement benefit, so you may be able to save less and still get to a total of 15% of pay.
  • If you can, try to prepare for the unexpected by saving a small percentage of your pay, perhaps 5%, for unexpected expenses.

MYTH #2: The stock market is too risky for my retirement money.

IN REALITY: Stocks are an important part of your long-term investment strategy.

It’s true that money in a savings account is safe from the ups and downs of the stock market. But it won't grow much either, given that interest rates on savings accounts are typically low. When it’s time to withdraw that money for retirement a few decades from now, your money won’t buy as much because of inflation. The stock market, however, has a long history of growth, making it an important component of your longer-term investment portfolio.

For instance, for a young person investing for retirement, a diversified investment strategy based on your time horizon, financial situation, and risk tolerance could provide the level of growth you need to achieve your long-term goals, while allowing you to sleep more soundly at night.

There are a variety of ways to invest. Building a diversified investment mix based on your needs and the length of time you plan to be invested can be as complicated or as simple as you prefer. You can build your own mix with the UC Core Funds—or just choose one of the all-in-one UC Pathway Funds.

Target date funds like the UC Pathway Funds are designed for investors expecting to retire around the year indicated in each fund's name. The funds are managed to gradually become more conservative over time as they approach the target date, which means the investment risk of each target date fund changes over time as the fund's asset allocation changes. Like all investments, these funds are subject to the volatility of the financial markets, including that of equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities. Principal invested is not guaranteed at any time, including at or after the funds' target dates.

MYTH #3: I’m young, so I don’t need to save for retirement now.

IN REALITY: Time is your secret weapon.

Retirement can feel very far away when you're young—but having all of those years to save can actually be incredibly powerful. That's because time and compounding are important factors in a retirement savings plan.

Compounding happens as you earn interest or dividends on your investments and reinvest those earnings. Because the value of your investments is then slightly higher, it can earn even more interest, which is then packed back into the investments allowing it to grow even more.

Over time, the value can snowball because more dollars are available to benefit from potential capital appreciation. But time is the secret ingredient—if you aren’t able to start saving early in your career you may have to save a lot more in order to make up for the value of lost time.

You can start by making voluntary contributions to your UC 403(b) or 457(b) plan.

A tale of two investors.

LaShawn and Marley both contributed to the 403(b) Plan until they reach age 65, but LaShawn started at age 35 and Marley starts at age 45. Even though LaShawn saved less than Marley, LaShawn still coasted into retirement with more money.






Starts contributing at this age 35 45
Contributes this annually until 65 $7,000 $15,000
Account balance at age 65 $707,511 $657,978
This hypothetical illustration assumes a 7% nominal annual growth rate on investments. The constant $7,000 or $15,000 contribution is made at the beginning of each year starting at ages 35 and 45, respectively. The total balances for the two hypothetical portfolios are then compared at the assumed retirement age of 65. All accumulated savings amounts are shown in future (nominal) dollars. The illustration does not take into account any taxes or fees. Your own plan account may earn more or less than the example and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against a loss in a declining market. Investing involves risk, including the risk of loss.

MYTH #4: There’s no way of knowing how much money I’ll need in retirement.

IN REALITY: UC’s Retirement Review makes it easy to see how much you may need.

How much you’ll need depends entirely on your situation and what you plan to do when you leave UC. But UC helps you figure it out by providing the Retirement Review. It gives you a personalized estimate of how much you are on target to receive in retirement from your UC benefits.

To help you see if you’re on target, your Retirement Review compares your estimated retirement income to the amount you may need in retirement income. (Login required.) 

Don’t worry if you’re not on target. Contributing a small amount to your UC 403(b) or 457(b) plan, increasing your contributions when you’re able, and investing for growth in a diversified mix of investments could help you catch up over time.

MYTH #5: All debt is bad.

IN REALITY: Not all debt will hold you back.

It’s true that carrying a balance on your credit card or a high-interest loan can cost a lot—significantly more than the amount you initially borrowed. But not all debt will hold you back. In fact, certain types of debt, like mortgages and student loans, could help you move forward in life and achieve your personal goals.

Plus, the interest rates on mortgages and student loans are typically much lower than those on personal loans or credit cards, and the interest may be tax-deductible.

No matter what kind of debt you take on, make sure you shop around for the best rates and never borrow more than you can afford to pay back on time.

MYTH #6: Credit cards should be avoided.

IN REALITY: If you control your spending and pay off your card balance each month, credit cards can be a helpful tool.

As long as you pay off your card balance in full each month to avoid interest, making purchases with credit can be worthwhile. Many credit cards offer a rewards program. If you make all your everyday purchases with your card, you could quickly rack up points you can redeem for cash, travel, electronics, or to invest.

Also, demonstrating that you use credit responsibly can help you increase your credit score, making it easier to buy a car or a home later on. It may even earn you a lower interest rate when you borrow in the future. It can be difficult to dig out of credit card debt, but if you control your spending and pay the card off every month, it could pay you back.


See if you’re on target.

View your Retirement Review to compare your estimated retirement income to the amount you may need in retirement income. (Login required.)

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