Confident you’ve got everything figured out for your retirement? It’s easy to assume you know how and when you want to retire, but there are common myths and misunderstandings that could lead you astray. Let’s clear up some of the misconceptions that can trip you up.
Myth #1 Your retirement savings will last.
US citizens are living longer. According to the Social Security Administration, roughly one out of every three 65-year-olds today will live until at least age 90, while one in seven will live to age 95 or older. This could be you. If you live longer than you anticipated, your retirement savings may not last. Increasing your retirement contributions, as you can, will better ensure your money will last.
Myth #2 Your living costs will be lower in retirement.
While you may not have a car payment, mortgage, or children in college, inflation is the wild card when you are on a fixed income. Even more, parents/guardians often qualify for fewer tax breaks when the children leave the house, and don't forget unexpected medical expenses or home repair costs may appear. If you’re not prepared for these things, your cost of living will likely not be lower. According to the Nationwide Retirement Institute Peak Retirement Survey, current retirees said they spend more than half of their retirement income (53%) on basic expenses. Track your spending now and estimate what additional expenses you may face to keep your living costs lower in the future.
Myth #3 Social Security will cover all your expenses.
You may have contributed to Social Security all your working life so it should support you when you retire. But unfortunately, Social Security benefits only replace about 39% of past earnings. Contributing to an employee sponsored retirement plan such as a 401(k), Roth 401(k), and 403(b) is one way to make up the difference. Waiting to claim Social Security at age 70 will allow you to receive the maximum monthly benefit but before doing so, you should consult a financial planner to make sure this is the best option for you.
Myth #4 Medicare will cover all your medical bills.
Medicare does not cover all healthcare expenses in retirement. There are deductibles and copayments, and traditional Medicare has gaps in its coverage that many people use a Medigap policy to cover (more commonly known as Medicare Supplement). Traditional Medicare also does not cover vision, dental expenses, or hearing issues, so you will need to factor in the cost of eyeglasses, dental care, dentures, and hearing aids. Traditional Medicare also requires you to purchase a prescription drug policy to cover your medications. To cover the costs of care at the end of your life, some individuals purchase long-term care insurance.
Myth #5 You can work as long as you want to.
According to research on pandemic-induced change in retirement expectations, data from the Survey of Consumer Expectations’ (SCE) triannual Labor Market Survey revealed a steady decline in the average likelihood of people working full-time beyond age 62 from 2014 to 2020 and a sharp decline post-pandemic due to several unknown factors. Because one’s ability to work can be unpredictable, having a backup plan is wise.
Myth #6 You don’t need help with retirement planning.
It’s not that you can’t manage your retirement on your own, because you can. But retirement has many moving parts: age, Social Security, retirement accounts , investments, personal savings, one's estate, taxes, and more. A financial planner has the expertise to help you navigate this journey. They’ll work with you to develop a personalized plan tailored to your needs; likely making you better off than you would have been if you had managed it yourself.
