5 Common Myths and Facts About Retirement

Retirement is meant to be a time when people relax and enjoy life. These men and women have spent decades working and raising children. Now it is time to do what they want with their lives. However, countless individuals have misconceptions about retirement and find their last years on this planet aren’t all they intended due to the myths being shared. What do people need to know about retirement to ensure the senior years are enjoyable?

Photo by cottonbro from Pexels

Savings

People often choose an arbitrary figure and decide that is the amount needed for retirement. These people believe by withdrawing four percent from savings every year, the money needed during the senior years will be available. However, this formula does not work for everyone. A person must take their individual circumstances into consideration when determining how much to save for retirement and how much to withdraw yearly. In addition, older individuals need to prepare for the unforeseen. For example, an individual may need to move to a Senior Independent Living facility. This relocation could completely alter the retirement plan, as it will have a different impact on the budget than remaining in the residence.

Medicare

Seniors often don’t realize Medicare will not cover all health care expenses. For instance, it doesn’t pay for extended nursing home stays or most home health care options. Sadly, the Employee Benefit Research Institute estimates the average couple today must have a minimum of $265,000 in their retirement account to cover median prescription drug expenses. As health care costs continue to rise, this figure will probably rise as well.

Social Security

People often hear that Social Security won’t be around for much longer. Congress typically brings this issue up when fighting over the budget. However, some experts state Social Security isn’t in as much trouble as people have been led to believe. This doesn’t mean a person should expect their Social Security check to cover all of their needs during retirement, though. Seniors must save money to fund anything the monthly payments won’t cover. Furthermore, if a person can save enough or continue working until the age of 70, this monthly check will increase in size by a significant amount.

Work

People often talk about working well past the normal age of retirement. However, a person should not count on this. If an individual becomes ill or disabled, they might need to quit working sooner than planned. In addition, finding a well-paying job becomes harder as a person ages. While it is possible for some men and women to work into their 70s or 80s, no one should count on being able to do so when planning for retirement.

Reduced Spending

People often say they will spend less when they retire. However, this isn’t always the case. A person may wish to travel or pursue a new hobby and find doing so costs more than they expected. In addition, people won’t pay less in taxes if their income doesn’t change when they retire. In fact, they may find they remain in the same income tax bracket. Unfortunately, people often get fewer tax breaks as they get older because they have paid their mortgage off and can no longer deduct money for a child’s college expenses. Tax rates may rise in the future, leading to additional spending.

Ensure you remain flexible when planning for retirement. Nobody knows what the future holds, so it’s always best to assume more money is needed. When you have ample money in savings, you will be prepared for whatever life has in store. Work with a financial advisor to ensure enough money is being saved to enjoy your the senior years.