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Wall Street’s Top Four Retirement Planning Myths -- and How They Hurt Investors


Hype by Brokerages Has Made Investors Take on Too Much Risk and Pay Too Much in Fees, Says Financial Author Scott Burns

DALLAS - Trust in big Wall Street firms is at an all-time low as a result of the current U.S. financial crisis. Scott Burns, chief investment strategist for AssetBuilder, says this development isn’t all bad – because individual investors will now think twice about buying into Wall Street’s prevailing financial planning myths.

“People are moving their money away from the major brokerage firms to smaller, independent advisors,” says Burns, syndicated columnist and co-author with economist Laurence J. Kotlikoff of the book “Spend ’Til the End: The Revolutionary Guide to Raising Your Living Standard – Today and When You Retire” (Simon & Schuster, 2008). ”This means they will be exposed to less self-serving Wall Street hype – particularly when it comes to planning for retirement"

Burns says Wall Street’s full-service brokers have led investors to take on too much risk and to pay too much in fees by propagating the following four retirement planning myths:

Myth 1: Fees don’t matter.

“Wall Street firms don’t want you to think about fees. They want you to subscribe to the magical belief that costs don’t matter. But they always matter,“ Burns says. ”Investment expenses can be reduced by more than 2 percentage points a year in some cases, which can have a dramatic impact on your total return. Remember: Costs are constant. Performance is not"

Myth 2: Your investment earnings must replace 70 percent (or more) of your current income at retirement.

“Wall Street calls it your ’retirement income replacement rate.’ It’s the percentage of your pre-retirement income you ’need’ to sustain your standard of living in retirement,” Burns says. “I call it ’replacement bait.’ The percentage is set so high that it pressures us to save an excessively large portion of our income – or to take on excessive risk in an attempt to reach unrealistic financial targets.”

Myth 3: Risk diminishes over time.

“People buy into the idea that risk diminishes, the longer your investment term. It doesn’t,” Burns says. “Your risk from holding stock, for example, depends on both the extent of your stock holdings and your spending behavior. If your spend-down rate is too high, stocks will be riskier the longer you hold them.”

Myth 4: You should invest as much as possible, as early as possible.

“This is a great idea -- for the financial services industry. But it is contrary to the way real life works for most people,” Burns says. “It’s understandable that Wall Street would want to start collecting fees and commissions on our savings for decades before our savings will do anything for us. But we need to remind ourselves that our retirement savings are their lunch. This doesn’t mean we don’t all need to save. It simply means saving a lot of money at the appropriate time.”

Learn more about Burns’ ideas from “Spend ’Til the End” on the AssetBuilder Web site at

About Scott Burns

Scott Burns is a newspaper columnist and author who has covered personal finance and investments for nearly 40 years. Today, he is one of the five most widely read personal finance writers in the country, according to The Dallas Morning News. In 2006, he co-founded AssetBuilder, a Registered Investment Advisor (RIA), where he serves as chief investment strategist.

Burns and Laurence J. Kotlikoff are co-authors of “Spend ’Til the End: The Revolutionary Guide to Raising Your Living Standard -- Today and When You Retire” (Simon & Schuster, June 2008) and of “The Coming Generational Storm: What You Need to Know About America’s Economic Future” (MIT Press, 2004).

About AssetBuilder

AssetBuilder offers weary investors a science-based alternative to the unnecessary costs, risks and complexity of traditional Wall Street firms. With fees that rank among the lowest in the financial services industry, AssetBuilder provides customers a menu of pre-constructed, risk-managed portfolios that make choosing and implementing a personal investment strategy simpler than ever. Co-founded by personal finance writer Scott Burns, AssetBuilder’s portfolios are an extension of Burns’ widely praised “Couch Potato” investing. Based in Dallas, AssetBuilder is a Registered Investment Advisor. For more information, visit the company’s Web site at


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