There’s a lot of information that gets thrown around about retirement. And you shouldn’t believe everything you hear, as such misconceptions can lead to your retirement plans going astray. To avoid any form of disruption to your plans, here are a few myths about retirement you should definitely ignore.
Your Savings Target Should Be a Specific Number
One of the more bizarre myths about retirement is that you should set a specific number as your savings goal. This makes no sense, as retirement comes with lifestyle, health, and unforeseen expenses, none of which you can predict. The best action is always to save as much as possible.
Investing Is Too Risky for Retirees
Some people think that retirees should avoid investing to protect their savings, but that’s bad advice. Inflation can erode purchasing power, making some level of investment necessary to protect your retirement fund. Speak to a financial advisor, and they’ll get you on the right track.
Downsizing Always Saves Money
Most retirees consider downsizing to a smaller home upon retiring, but remember: this doesn’t automatically reduce costs. Moving expenses, property taxes, and home maintenance can offset anticipated savings, so evaluate the true financial impact of downsizing for yourself, ensuring it aligns with your retirement budget.
You Can Always Work Longer
People often claim that retirement saving isn’t a big deal, as you can count on working beyond retirement age. However, this is rarely the case; in fact, health issues and job market conditions might force an earlier retirement than planned, so make sure you save up a robust retirement fund.
Medicare Will Handle All Healthcare Costs
While there’s no denying that Medicare is useful, it doesn’t cover everything. Long-term care, dental, and vision expenses often require additional insurance or out-of-pocket spending, so preparing for these costs in advance is advisable to prevent financial strain during retirement. Always expect the unexpected.
You’ll Spend Less in Retirement
Another common retirement myth is that your expenses drop significantly after retirement. This couldn’t be further from the truth. Healthcare, leisure activities, and travel during retirement can actually increase costs, so keep this in mind when budgeting for your retirement, and don’t skimp out on savings.
Your Kids Will Take Care of You
Contrary to popular belief, relying on your children for support in retirement is not always feasible. Their circumstances might not allow for it, and it can strain relationships if they feel forced, so it’s best to plan for independence where possible, ensuring you won’t place a burden on your family.
Retirement Means Total Withdrawal from Work
Just because you retire doesn’t mean you have to stop work entirely. Many retirees find part-time or freelance work fulfilling and financially beneficial, as staying engaged in the workforce, even in a limited capacity, can provide additional income and a sense of purpose.
You Don’t Need a Financial Advisor
Ignore anyone who tells you that you don’t need a financial advisor to retire. This is awful advice because managing retirement savings can be complex, and you’ll find the expertise of a financial advisor very helpful, particularly when it comes to personalized strategies for remaining financially stable.
You Can Figure Out Retirement Finances Later
Like anything in life, it’s never smart to procrastinate on retirement planning, despite the advice of many. Doing so can lead to insufficient savings, so starting as early as possible is your best bet, allowing you to take advantage of compound interest and adjust your strategy as needed.
Taxes Won’t Affect You in Retirement
Anyone who claims that taxes won’t affect you in retirement needs to get their facts straight. Taxes can still impact your retirement income, with withdrawals from certain retirement accounts and Social Security benefits being taxable. Do your research, ensuring that you know what you’ll be due upon retiring.
You Should Pay Off Your Mortgage Before Retiring
While paying off your mortgage before retiring might sound like a dream, it isn’t always the best strategy. Maintaining liquidity and having enough savings might be more beneficial than depleting resources to eliminate mortgage debt. Assess your own situation, deciding for yourself if it’s worth it.
Retirement Planning Ends When You Retire
Unfortunately, it’s a myth that retirement planning stops upon retirement–it’s a constant uphill battle. Continual adjustments are necessary to adapt to changing expenses, investment returns, and life circumstances, so stay proactive in managing your finances, ensuring long-term stability and peace of mind.
Pension Plans Are Guaranteed
Many young people falsely believe that pension plans are guaranteed, but that’s a risky belief. Companies can change or terminate pension benefits at their will, leaving retirees vulnerable. That’s why it’s wise to diversify your retirement savings where possible, having multiple income sources to give yourself a good safety net.
You Don’t Need to Save If You Have a High Income
Another retirement myth you shouldn’t believe is that high earners don’t need to save for retirement. This doesn’t make sense; if anything, they will have more expensive lifestyles, so it’s all relative. Anyone telling you not to save for retirement in any way should be ignored for your own good.
You Can Rely on Your Home Equity
There’s no denying that home equity can be a valuable asset, but it shouldn’t be your sole retirement plan. Housing market fluctuations and the need for a place to live limit its reliability, so protect your equity and only leverage it if your financial advisor deems it to be worthwhile.
You Can Dip Into Your Retirement Fund
While it’s tempting to dip into retirement accounts for other financial needs, this can jeopardize your future, so don’t do it. Early withdrawals often incur penalties and reduce the amount available for retirement, so keeping your retirement account dedicated to its purpose is more financially savvy.
You Must Retire at a Certain Age
Contrary to popular belief, there’s no one-size-fits-all retirement age. The myth goes that the magic age is 65, but personal circumstances, financial readiness, and career satisfaction all play roles in determining the right time. Don’t listen to the people around you; plan sufficiently, and you’ll come to your own decision.
All Debt Should Be Eliminated Before Retirement
It can certainly be helpful to eliminate debt before retiring, but you shouldn’t go overboard. Low-interest debt, like a mortgage, might be manageable within your retirement budget, and holding on to it can leave you with more cash liquidity, which will likely come in handy during retirement.
Retirement Means the End of Professional Growth
No matter what people say, retirement doesn’t signal the end of learning and growth. Many retirees pursue new skills, hobbies, or second careers. Staying engaged and open to new opportunities can enrich your retirement years and provide additional income, so go wherever your academic curiosity takes you.