None of us knows everything we need to know about money, so we may turn to experts for help. But some money professionals who offer advice are not qualified to do so — nor are they required to put our interests ahead of theirs.
Be cautious when accepting advice from the following sources.
Dealerships on length of an auto loan. The dealership wants to sell you a car. To make the payments more affordable, you may be offered a loan that lasts six, seven or even eight years. Longer loans can get you smaller monthly payments, but they cost more overall, since you will pay more interest. A better approach: Limit your auto loans to a maximum of five years for new cars or three years for used cars.
Mortgage pros about how much house you can afford. Good mortgage brokers or loan officers can be invaluable in helping you navigate a complicated process, but they can't tell you how big of a loan you can comfortably afford. Neither can your real estate agent. A better approach: Use online calculators to estimate how much to save for retirement and other goals. Then include those figures in your monthly expenses when using a mortgage affordability calculator.
Stockbrokers about whether to roll over your 401(K). Stockbrokers want to sell you investments that earn them commissions. Typically, they have no responsibility to make sure those investments are in your best interest. A better approach: Leave the money where it is if you like the old 401(k)s investment options, or roll it into a new employer's plan if that's allowed. Otherwise, roll the money into an IRA at a discount brokerage.
Social Security about when to claim benefits. You can collect Social Security as early as age 62, but your monthly benefit increases the longer you delay applying until it maxes out at age 70.
Multiple studies have shown that most people will collect more over their lifetimes if they delay filing.
Unfortunately, Social Security Administration employees sometimes advise people to start early — even though Social Security employees aren't supposed to give advice. Applicants have been told that it doesn't matter when they start benefits because the amounts paid out over their lifetimes will be the same. That's a misinterpretation of Social Security's attempt to be "actuarially neutral."
A better approach: AARP offers a free claiming calculator can help you figure out when to start benefits.
Other versions are available starting at $20 at Social Security Solutions or $40 at Maximize My Social Security.
