Updated on June 2018
Planning for something which is stretched out far away in the future is not always a top priority in most people’s list. This is true in case of retirement planning too. I have seen too many people taking a casual approach to saving because of the various retirement myths they hold.
1) It is too early to even think about retirement
Life expectancy of people is on the rise and the retirement phase is only getting longer. For many individuals they could be retired longer than they worked. Hence young earning individuals need to realize they need to not only “live” today but plan and save money for their retirement needs. Retirement planning should begin from the point in time you start earning your living. The later you begin the more challenging it becomes for you to plan for retirement.
2) Medicare will help me meet my retirement spending
There is no doubt that healthcare expenses are a major part of the overall retirement expenses and Medicare does help retirees. According to the Kaiser Health Foundation, Medicare traditionally has provided only 48 percent cover for the health costs for a variety of reasons. There are some routine health care costs which Medicare does not cover and these include costs related to eyeglasses, dental treatment or hearing aids. These expenses sometimes run up in thousands of dollars. Medicare also does not reimburse 100 percent of the healthcare expenses and retirees still have to pay the deductibles. In order to meet these expenses, retirees have to opt for an additional insurance policy which is popularly known as Medigap policy.
3) I can get another job during retirement
When young, you are energetic and healthy, and there is a tendency to get carried away and convince yourself not to think about working after retirement. But as you approach retirement age, things are not the same and you feel differently. You find the daily routine tasks to be exhausting and you would want to be free from these responsibilities. Forcing yourself to work during retirement really takes away from the charm of retired life. When retired, you ideally want to be able to use your time for things you were too busy for before. Also, there is the reality that once you’ve reached retirement age, job openings will be shorter and unappealing.
4) Expenses will be far less when I retire
One of the most important prerequisites about retirement planning is correctly estimating how much you should have saved. It is true that your everyday work expenses are no longer an issue but most people underestimate living expenses. While some expenses are no longer, other expenses arise which weren’t important before.
A lot of retirees put off traveling until they are in their “golden” years. Traveling costs never go down, only up. Medication not needed before can become an expensive issue. Also more and more grown children seek “assistance” from their retired parents.
At Self Directed Retirement Plans LLC, we establish true checkbook controlled self-directed plans. With these plans, our clients can take advantage of many alternative investments to help them reach their retirement goal. We also educate our clients how Roth can work to their advantage. Retiring with a tax free income stream is very possible if started early and correctly.
5) My pension plan is enough for me to retire on
The fact is without advance planning, it is not possible to accurately predict if your pension combined with your social security benefits will keep you covered in case of emergencies and allow you to enjoy the same lifestyle post-retirement. If you work for an employer that offers a retirement saving plan, then your retirement income will be the monthly income stream generated from that employment based on the number of years you have served the employer. But since most people don’t stick to the same employer throughout, they may or may not have accumulated enough in earned benefits. This is why retirement planning is very important to ensure you have accumulated enough for the golden years of your life.
6) My social security will suffice me
While social security accounts for roughly 38% of an average retiree’s income, the government may become less generous than it has been all this while. Also, as the government continues to increase the age that you need to reach in order to receive full social security benefits, retirement planning is becoming ever more important. Building a retirement reserve in addition to the social security benefits is essential because social security will only supplement your retirement income and so it should not be treated as a major part of your retirement reserve.
So, don’t let these retirement myths mess with your retirement planning and turn the golden years of your life into lead. If you still haven’t started planning for your retirement, you may not be able to fund the lifestyle decisions you make post-retirement. So, if you don’t want to miss the boat, start as early as possible and save as much as you can. Call us at (866)639-0066 and we will help you invest wisely with our win-win retirement planning strategies.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He brings over 30 years of diverse experience as a financial advisor. Rick takes great pride in giving honest and very experienced advice. Rick can readily converse with business owners and people looking to take control of their retirement accounts.