5 Myths That Can Hinder Retirement

Healy Financial |

When many of us think of retirement, we think about having more time to spend with our families, pursue hobbies and travel. Although no two retirement experiences are the same, it's important to know what your retirement will look like before it happens and debunk retirement myths that may dominate your expectations.

Here are five retirement myths that I hear from my clients:

Myth #1: I'll live off my Social Security

A recent poll found that future retirees overestimate their Social Security benefits. In fact, a recent poll indicated that adults over age 50 expect that Social Security will be their main source of retirement income and overestimate their Social Security benefit. Today, the average retiree receives an average income of $1500 from Social Security or $18,000 per year. That's not enough to pay basic living expenses, let alone enjoy travel or other retirement activities. (1)

And furthermore, for those not retiring soon, Social Security benefits could be greatly reduced unless Congress takes action to bolster the fund.

If you want to travel and pursue new dreams in retirement, you'll need to consider your expenses during retirement and plan for unexpected expenses, too. Will your debt be paid off? How much money do you need to have in your emergency fund to feel comfortable?

Working with a financial advisor, you can compare your current expenses with your desired future lifestyle and develop a plan to secure your retirement future.

Myth #2: I'll Have Enough to Retire if I Invest Up to My 401(k) Match

If your company offers a 401(k) match, make sure you take it. It's a great way to start investing and your company match will boost your retirement savings.

However, you need to invest 15 percent of your income if you really want to build a solid retirement nest egg. It may seem like a lot at first, but once you get accustomed to living on 85 percent of your income, you'll be glad you did when it's time to retire.

Too much for you to save right now? You aren't alone. Working with a financial planner to develop a financial plan, can help you reach your goals.

A Healy Financial advisor can help you determine a financial plan and a retirement strategy that fits your situation, whether it be investing in a traditional 401(k), or a Roth IRA or a Roth 401(k).

Myth #3: I'll Work Throughout Retirement

As many as 74 percent of workers say they plan to work through retirement. Some want to stay busy and make some extra money. Others simply can't afford to retire. Yet, only 27 percent of retirees say they were actually able to do so. Working through your retirement years is not the best way to plan for a secure retirement. You may not be physically able or you may have a spouse who needs your care. (2)

We help plenty of folks who truly love what they do and want to continue for as long as they are able but we still talk about the idea of financial independence – having the financial ability to walk away when you want to, even if you choose to continue working.

How can you avoid working through retirement because you need to? Stop procrastinating and start planning. You'll be happy you did when it's time to retire.

Myth #4: Medicare Will Cover All My Medical Expenses

Medicare can be confusing. Especially about what it will pay and what it will not pay.

The good news is Medicare can give you affordable health insurance coverage for doctor visits, medication, and hospitalization when you turn 65. However, it does not cover the cost of deductibles, co-pays or any long-term care that lasts longer than 100 days.

The good news is you'll have affordable health insurance coverage for your medical care; however, you need to be prepared to pay health expenses not covered by Medicare. These expenses can mount quickly in the later years of life.

Long-term care insurance can protect you and your spouse in the event you need the service. It's really important because long-term care is the biggest health expense in retirement. According to AARP, on average, more than half (56%) of the people turning 65 today will need long-term care of some kind. The average assisted living facility can cost $50,000 a year and private room nursing home costs can be twice as high. It’s not fun to think about needing a long-term care policy, but you'll reap rewards if you or your spouse ever need it.

Another way to prepare for future retirement health expenses is to invest in a health insurance policy with a health savings account (HSA). You can use your HSA to fill in the gaps for medical expenses Medicare does not cover. Not only does the money you invest in an HSA grow tax-free, but you can use it to pay for medical expenses throughout your lifetime without paying taxes on it.

A Healy Financial advisor can help you and your spouse establish a long term care plan.

Myth #5: I Can Do It On My Own

Properly managing your investments takes time, skill and effort. At all stages of life, people have a lot on their plate. Finding time to research financial questions, evaluate your options, and execute a decision takes time.

Furthermore, when you are doing it alone, emotions can get the best of you and cause you to jump in and out of the market when it goes up and down. Or, you may overinvest in one sector of the market that's booming, creating an unbalanced portfolio.

A Healy Financial advisor can help you focus on the long term game.

Ready to plan a secure retirement? Let's connect!

About the Author

Joseph Cramer, CFP, Financial Advisor

Joe, resides in Indiana and graduated from the Carlson School of Management at the University of Minnesota with a BSB in finance, risk management, and insurance.

He appreciates working with young professionals and families, especially those in the medical community. His areas of expertise include: holistic fee-based financial planning and coaching; asset protection strategies in the areas of specialty-specific disability insurance and life insurance; debt management; tax deferred strategies for funding education and retirement; and, wealth management.

(1) https://www.prnewswire.com/news-releases/future-retirees-overestimate-how-much-they-will-receive-in-social-security-benefits-300846298.html

(2) https://www.ebri.org/docs/default-source/rcs/2020-rcs/rcs_20-fs-2.pdf?sfvrsn=ffbc3d2f_6