Avoid This Terrible Retirement Advice Making The Rounds On Social Media

Plenty of lousy financial advice can be found out there in the ether. From money-saving tips that simply don't work (like skipping the morning coffee to add mightily to your retirement accounts) to direct investment approaches that lack teeth, lots of terrible advice is floating around waiting to trap hard-working savers. Middling results and backsliding values are common effects after deploying slick-sounding advice that lacks substance, and the worst part is many investors and savers won't notice these mounting losses in their accounts until the strategy has wreaked havoc for quite some time.

Learning to parse sound advice from the noise is something all savers will need to do in order to successfully plan out their retirement savings strategy and execute it. But it's become harder than ever to accomplish this task with the continued influence of social media and its influencers only growing with time. We sat down with Lawrence Sprung, CFP, and author of "Financial Planning Made Personal," as well as the founder of Mitlin Financial, to discuss this trend. He gave us great advice on how to find a financial adviser you can trust, and how to avoid the traps inherent to advice doled out on social media platforms. However, Sprung also honed in on a specific piece of advice that's commonly found in the influencer culture of the digital media ecosystem.

According to Lawrence Sprung, he's concerned by the streamlining of retirement assets away from varied investment types and toward a singular approach, and he notes social media is a compulsive sore spot in this mindset shift. Said Sprung, "The public is being fed a great deal of bad information via social media." Yet, there is one suggestion for him that trumps them all. He told us, "One of the worst pieces of advice I've seen on social media is telling people not to use 401(k)s, college savings plans like 529 plans, or other savings and investment accounts. And instead of investing in those accounts they say to put all that money into life insurance."

Sprung has also taken exception to life insurance as a retirement savings outlet more generally, but his worry here is specifically in regard to the rarefied status people in positions of online influence have given it. "I am not saying that life insurance does not have a place in a financial plan," he said, "because it does, but life insurance is not the Swiss army knife of investing. Following this advice could cause many a great deal of financial harm."

While a whole-life policy gains a cash value that grows over time, its growth is severely stunted when compared to other investment options that a saver can take advantage of when planning for retirement. A company match, for instance, is not going to be available in this life-insurance space, while contributing to a 401(k) plan could make use of additional, free money from a company's matching funds incentive.

A life insurance policy can be a massively valuable thing to add into your long-term financial plan, however, as a singular paragon of value, it falls short of the goals that most savers will hold for their future. Instead of falling back wholeheartedly on a life insurance policy that will provide your loved ones with a death benefit (or you a cash-value exchange), Lawrence Sprung suggests diversification across all those previously mentioned asset types; that is, investing in collegiate funding programs to support your children, growing a 401(k) with the help of company-match benefits, as well as parking money in a Roth IRA to take advantage of tax-reducing opportunities on your portfolio's long-term growth.

Investors should always utilize a range of tools to help them achieve their goals. The reality is that every avenue open to you provides some kind of benefit others don't introduce. But taking advantage of the best blend of features requires a saver to place their capital in different buckets. With this said, be warned: One of Sprung's noted personal finance mistakes that often befall the best-laid plans of those saving for retirement is a lack of quality planning and knowledge of where funding sits. If you do choose to invest in multiple retirement accounts, you will need to keep careful track of how each one is performing over time so you can continue to invest contemporaneous funding into lucrative account types and asset classes.