5 Money Myths US Millennials Still Believe (And What to Do Instead)

5 Money Myths US Millennials Still Believe (And What to Do Instead)

As a US millennial, you've likely heard your fair share of personal finance advice. But how much of it is actually true? Many common myths can lead to financial missteps, causing you to miss out on opportunities or make costly mistakes. In this article, we'll debunk five money myths US millennials still believe and provide actionable advice on what to do instead.

Myth #1: You Need to Be a Millionaire to Invest in the Stock Market

Many young adults believe they need a significant amount of money to invest in the stock market. However, with the rise of micro-investing apps and low-cost index funds, getting started with investing has never been easier or more affordable. For example, you can start investing with as little as $100 using platforms like Robinhood or Acorns.

Here's a comparison of the fees associated with popular investment platforms:

Platform	Management Fee	Minimum Investment
Vanguard	0.03% - 0.20%	$1,000
Fidelity	0.00% - 0.20%	$2,500
Robinhood	0.00%	$1

You don't need to be a millionaire to start investing. In fact, even small, consistent investments can add up over time. Consider setting aside a fixed amount each month, such as $50 or $100, and automate your investments to make the most of your money.

Myth #2: You Should Max Out Your 401(k) Contributions

While contributing to your 401(k) is a great way to save for retirement, maxing out your contributions might not always be the best decision. The IRS allows you to contribute up to $23,000 in 2024, but this amount may not be feasible for everyone, especially if you're just starting out.

Consider contributing enough to take full advantage of your employer match, which can be as high as 4% or 5% of your income. This is essentially free money that can significantly boost your retirement savings over time.

Myth #3: You Should Only Invest in the S&P 500

Many investors believe that the S&P 500 is the only index fund worth investing in. However, there are many other index funds and ETFs that can provide diversification and potentially higher returns. For example, you can consider investing in international markets, such as the MSCI EAFE Index, or sector-specific funds, like the Vanguard Real Estate ETF.

Here's a comparison of the performance of popular index funds:

Index Fund	1-Year Return	5-Year Return
Vanguard 500 Index Fund (VFIAX)	16.1%	13.2%
iShares MSCI EAFE ETF (EFA)	10.3%	6.5%
Vanguard Real Estate ETF (VGSIX)	22.1%	12.1%

Diversifying your portfolio can help reduce risk and potentially increase returns over the long term.

Myth #4: You Should Avoid Roth IRAs

Many investors believe that Traditional IRAs are better than Roth IRAs because they offer tax deductions upfront. However, Roth IRAs can be a great option for tax-free growth and withdrawals in retirement.

Consider contributing to a Roth IRA, especially if you expect to be in a higher tax bracket in retirement. This can help you save money on taxes and make the most of your retirement savings.

Myth #5: You Should Withdraw Your Social Security Benefits at 62

While it's true that you can start collecting Social Security benefits as early as age 62, this might not always be the best decision. You can delay collecting benefits until age 70, which can result in higher monthly payments.

Here's a comparison of the monthly benefits you can expect at different ages:

Age	Monthly Benefit
62	$1,416
65	$1,555
70	$1,822

Consider delaying your Social Security benefits to maximize your monthly payments and ensure a more secure retirement.

Frequently Asked Questions

How much should I save each month for retirement?

The amount you should save each month for retirement will depend on your income, expenses, and goals. Consider contributing at least 10% to 15% of your income to your retirement accounts, such as a 401(k) or IRA.

How can I maximize my employer match in my 401(k)?

To maximize your employer match, contribute enough to your 401(k) to take full advantage of the match. This may be as little as $1,000 or $2,000 per year, depending on your employer's match rate.

Can I withdraw from my Roth IRA before age 59 1/2?

Yes, you can withdraw from your Roth IRA at any time, but you may be subject to income taxes and penalties if you withdraw before age 59 1/2 or within five years of opening the account.

Summary

US millennials often believe in common money myths that can lead to financial missteps. By debunking these myths and providing actionable advice, you can make informed decisions about your money and achieve your financial goals. Remember to start investing early, contribute to your retirement accounts, diversify your portfolio, and consider delaying your Social Security benefits to maximize your monthly payments.