Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger who has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below.
Misconceptions mislead us; they are the barrier to achieve something good in life. Often people believe in myths to feel better, but later they regret. Therefore, it is advisable to find out the facts before making any important decision in life.
Today’s topic is regarding retirement myths that can ruin your retirement planning.
Be aware! Believing in the retirement myths will not let you achieve a secure and peaceful post-retirement life.
7 Popular Retirement Myths to Avoid
Know the facts related to retirement planning in the article and implement them to ensure a financially secured retirement life.
1. You have saved enough money for retirement
All you need to live a comfortable retirement life is having enough money. However, what does enough money mean? It is difficult to figure out a particular amount that can protect your golden age fully. Why? The answer is simple – lifestyle inflation. If you don’t increase your retirement savings, then the contributed amount may not be able to fund the standard of your lifestyle that you are living at present.
So, don’t believe in any magic number when you’re saving for retirement. Calculate your savings keeping the inflated price in mind and the lifestyle that you want to maintain at retirement.
2. Medicare will take care all your health-related cost at retirement
Medicare is a big help to mitigate doctor’s bill and hospital expenses. However, it is not sufficient to fund all your medical costs including long-term medical expenses and vision, dental, and hearing related costs. In addition to this, the costs related to Medicare can add up quickly in the form of coinsurance and copays.
Whereas, contributing to the Health Savings Account (HSA) is one of the best ways to save to cover medical expenses at retirement. It offers a variety of tax benefits like tax-deductible contribution, tax-free growth, and withdrawals. At the age of 59 1/2, you can withdraw the money for non-health care expenses paying the federal income tax on it. HSA acts like a traditional IRA. You can also withdraw money to pay qualified medical expenses, including dental and vision.
3. You will not get the social security benefits
It is true that due to the funding issue, social security benefits are now unpredictable. However, it will not disappear. It is expected that the social security is fully funded until 2037. People will get 79% of scheduled benefits later. So, don’t think it will disappear entirely. However, instead of thinking whether or not the social security benefit is fully or partially funded at the time when you retire, it is advisable to keep other sources of income to secure your retirement
4. You are too young to start saving for retirement
Most of the young people, who have started earning money, often think that they are too young to plan for their retirement. However, the concept is not true. As per the financial experts, early 30 or mid 30 is the proper time to start saving for retirement. The sooner, the better. Due to the disappearance of traditional pension plans and the unpredictability of government programs like Social Security and Medicare, young generation needs to save more money to secure their retirement than the previous generation. Young people have no other choice but to prioritize the retirement savings for their own well-being. Otherwise, they may face poverty and stressful financial scenario at retirement.
Therefore, it is advisable to save as much money as possible to avoid the shortage of savings at retirement.
5. No need to save for retirement since you will work forever
Most of the people plan to work for a longer time. As per them, there’s no need to save money for the retirement since they can earn money as long as they want. But most of the time, the calculation proves wrong. Why? Life is full of uncertainties; it goes its own way. Your health may not allow you to work for a long time. Thus, it is important to make savings plan for retirement. By doing so, you will be able to fund your retirement well.
6. You will die soon after the retirement
It is advisable to plan for at least 30 years of retirement life after leaving the mainstream of working life. If you think the life after retirement is short, most likely you will run out of money. So, to enjoy your golden age, you should have enough resources. Thus, life will not become a burden; you will enjoy the best phase of your life happily.
7. Children come first
For most of the parents, funding children’s education is the first priority. Parents simply can’t say “no” to their children. However, by funding the children’s education, you are putting your own retirement security at risk. After a certain age, you should tell your children to become financially independent. Ask them to take the opportunity of federal grants or scholarships to fund their higher studies. Also, make them financially responsible so that they can understand the importance of good financial habits. Encourage them to start earning to fund their own need. Parents should nurture their children more smartly for securing their own retirement.
Lastly, instead of believing in myths, start planning for future in a practical way. Invest your money to take advantage of compound interest, or start putting money in the traditional Roth IRA or 401 (K). If you want to support your children, plan for their education cost at the time of their birth. Open a 529 college savings plan to save money for your children’s education. Remember, underestimating the retirement fund can cost you dearly. At the age of mid-60, you may not be able to work full time to earn money.
Taking retirement doesn’t mean the end of all expenses; there will be all sorts of expenses in your life. Don’t think that you will spend less; the fact is, you will have to pay more for everything due to the inflated price. So, when you have the opportunity to save money, don’t waste. Start saving money aggressively from today to secure your retirement.
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