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Retirement is a situation where you won’t be able to have a continuous stream of income. Retirement must be the most dreaded situation as the lack of money may create misery in your life.
As per the CNBC survey, more than half of the people want to continue their job life until 65. But, almost 15% of today's retirees have to work longer to survive.
Most of them have no solid saving cushion to live a peaceful financial life after retirement.
Thus they have no choice but to work until the age of 70 or above.
Remember, the cost of living is on a continual rise.
So, it is important for you to save enough money to maintain your current lifestyle in retirement. Also build a good nest egg can secure your future.
Thus, you will be able to enjoy your golden age without taking the much financial stress.
However, unfortunately, most of the people fail to build a good financial backup for their retirement.
Of course, the lack of proper financial knowledge is one of the major reasons they fail to protect their retirement.
In addition to that, some retirement myths obstruct people to choose the right path.
Here are 7 retirement planning myths not to believe while getting prepared to secure the financial future.
Myth: 1 I am too young to make retirement investments now
It is important to start the retirement investment accounts from now on - from the very beginning of your career.
Doing so, you won’t have to think about money later after retirement.
Remember, the earlier you invest your money, the better return you will achieve.
To maintain the present standard of living after your retirement, you should have enough savings or a steady income.
Thus, you must set retirement savings goal as soon as possible.
It is important to set the goal based on the lifestyle you hope to have; because you are the one who can only judge your living standard.
You need to be honest about how you desire to live during the retirement days and make an estimate of your need.
Based on the calculation, start saving money.
It is said that people should save enough money to survive 20 years after their retirement without working.
Myth: 2 I will repay the debts after retirement
In addition to starting to save through the retirement accounts, you have to try to pay off the debts that you already have.
Furthermore, you will have to avoid incurring additional debts.
You will have to understand that the high the debt amount, the lower will be the amount which you will be able to save.
To avoid accumulating further debts, make on-time payments on your monthly obligations (utility bills, mortgage payments, debt payments, credit card bills).
Thus, you will be able to avoid missing out payments, late payments, penalties and fines.
You should also follow a monthly budget to curb the unnecessary expenses. Cutting down extra expenses help to avoid random usage of credit cards. Once you stop excess usage of credit cards, you can avoid accumulating debts.
Myth: 3 I have a 401(k); it is enough to cover my retirement cost
The greatest advantage of the retirement accounts is, they provide tax benefits; but it is tricky.
If you only contribute to a 401(k), you may need to give a good amount to the uncle sam and there will be fewer options when it comes to tax saving.
According to Hanson, a certified financial planner, "Just as it's important to diversify investments, it's important to diversify tax strategies. If all of your money is in a [traditional] 401(k) or IRA, every time you need income, it's going to be taxed. But if you have money in a 401(k), some in real estate, some in a Roth IRA and some in a brokerage account or mutual fund, then you've got a tremendous amount of flexibility in how you pull income — and you can save in taxes by having a diversified approach".
Thus you should not hold a single investment vehicle to save money for your retirement.
Seek investment assistance from a certified financial advisor to make fruitful retirement investment.
Myth: 4 My insurance coverage is enough
You need enough insurance to cover the cost of any damage.
Thus, when you need, you can take advantage of the insurance coverage.
But, thinking that you have enough insurance coverage is wrong.
For example, the medicare may not be enough to cover your health care expenses in retirement.
According to AARP, "The basic coverage still costs seniors, on an average, more than $3,000 a year".
Remember, your health will be one of the biggest expenses in the future.
In addition to that, there will be other costs like car maintenance and repairing property damages.
Thus, it is important to revise the insurance coverage time to time to ensure that the coverage is enough to protect your home, health, and other belongings.
It is also important to have adequate savings set aside to combat any emergency.
Because an emergency can occur anytime and you may not be eligible to get the insurance benefit at that time.
Myth: 5 I will get the full social security benefit, so why save?
No doubt, social security benefit is one of the popular sources of income for the retirees, but unfortunately, it is becoming unpredictable day by day.
Due to funding trouble and increasing beneficiaries, social security benefit may not be fully available for you when you retire.
As per the current law, "79% of scheduled retirement benefits are projected to be payable to people in 2034, once the trust fund reserves are depleted if Congress fails to act".
So, after the year 2034, the social security benefit will be available for a certain percentage for you.
It is advisable not to completely rely on the social security benefit.
Young adults should give priority to the traditional retirement savings and other modes of investments to secure their financial future.
Myth: 6 I will work even after retirement - so, no need to save
Most of the people don't save money for their future. They think, working after the retirement age is the easiest way to live happily in their old age.
According to a recent survey by CareerBuilder, nearly 30% of workers (aged 60) said they don't want to retire until the age 70. About 20% of US workers said they don't believe they will ever be able to retire.
The strategy of working even after the retirement age is very uncertain.
No one knows what will happen tomorrow. Your health may not permit you to work after the age of 65.
Thus, it is safe to save as much as possible during your prime working years.
Once you turn 50, you will be able to get benefits from your 401(k) and IRA contributions.
Myth: 7 I will stay in the same or will move to a retiree-friendly state
According to a research by the National Conference of State Legislatures and the AARP Public Policy Institute, "Nearly 90% of older Americans want to age in place, and 80% said they believed their current residence is where they will always live".
Some people even believe moving to a retiree-friendly state will be better to live on less.
However, both the options are not appropriate.
Because retiring from the same place where you currently live may cost you big as the housing cost will be higher in the future.
As per the U.S. Bureau of Labor Statistics, housing is one of the greatest expenses of people aged 55 or above.
On the other hand, moving to a less expensive state is not always a great option. Why?
Low-income tax states are attractive for the retirees, but these states often have high property and sales taxes that can gulp their savings.
On the other hand, moving to a retiree-friendly state can increase the travel cost.
Most of the retirees often neglect the fact that wherever they live, they have to visit their family or friends who are states away.
There are many retirees who have left their place for states with lower or no income taxes.
Unfortunately, they end up with costly travel expenses to meet their families who are states away.
Alfie Tounjian, a certified financial planner said, "Don't make a move just because of taxes".
Lastly, as per The National Institute on Retirement Security estimate, "Baby boomers, who are retiring at the rate of 10,000 a day, find themselves particularly unprepared, with a median of $120,000 saved — not nearly enough to sustain a 30-plus year retirement".
Unfortunately, the people of our nation have $6.8 trillion short of what they need to sustain in their retirements.
According to the financial experts, retirement planning mistakes can ruin the golden years of your life. A lot of people follow wrong strategy and face trouble in achieving their retirement goals.
However, it is imperative to rectify the misconceptions and follow the right strategies to ensure a secure retirement
Talk to a financial advisor, read success stories of other retirees to understand the best strategy for a secured financial future.
Know more retirement myths here: Dismiss the retirement myths
