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7 Retirement Planning Myths: Separating Fact from Fiction for a Comfortable Retirement

January 8, 2024

As you are looking toward the road ahead, you may quickly find that planning for retirement is among the top assets to plan for to secure a future without having to work forever. There are several myths surrounding retirement planning. Here are seven of those top retirement planning myths and strategies for creating a top-notch plan yourself.

Myth 1: “Social Security or Pension Will Cover All My Retirement Needs”

Fact: Social Security and pensions are indeed essential to generating income sources for eventual retirement. However, those two items alone may not be enough to live a comfortable lifestyle once you reach that age.

Factors to Consider:

  • Inflation: The current market now will likely look much different by the time you reach retirement age. The cost of living continues to increase and what may seem like decent money at the time for fixed income sources like pensions, may later prove not to go very far.
  • Income May Vary: Social Security and pension benefits can vary significantly based on factors such as your earnings history and the age at which you start receiving benefits. Oftentimes, relying solely on this money can only work for a very frugal lifestyle. According to a recent CBS News: Money Watch article, the maximum amount of Social Security is $4,555 for someone who refrains from taking payments until age 70.
  • Emergency Savings are Not Retirement Savings: Emergency savings are a great way to make sure you have some extra cash set aside in case of an unplanned emergency. However, this shouldn’t be what is relied on for additional retirement funding.

For a retirement plan that will allow you to live a more comfortable lifestyle, it is important to find new retirement savings plans in addition to social security and pensions.

Myth 2: “I’m Too Young to Start Saving for Retirement”

Fact: You are never too young to start saving for retirement. The earlier you start, the more rewarding your future may be.

Advantages to saving early:

  • Compounding Returns: The earlier you start putting money into your retirement savings, the more time those savings have to grow. This includes compound returns, where the interest of your investment can grow over time.
  • Smaller Contributions: If you start saving early, you may find yourself with more opportunities to add smaller contributions to your investment over time, adding to the funding.
  • Flexibility in Investment Strategy: Time is everything. When you start saving early, you also leave more room to calculate where opportunities may lead and make adjustments to your plans.

Did you know that nearly 70% are concerned they may not have enough retirement savings? The same data shows that only four out of 10 workers start saving in their 20s. The younger you start saving for retirement, the more potential for savings you will have.

Myth 3: “Medicare Will Cover All My Healthcare Expenses”

Fact: While it is important to have medical coverage, the process of Medicare is often misunderstood. The program was designed for those of retirement age. However, it does not cover everything.

Factors to consider:

  • Different Coverage Plans: Medicare is not one size fits all. When you turn 65, you will have to decide on what plan to get onto. Dental, vision, and hearing are not typically covered. Long-term care options may also have limited coverage options.
  • Copays and Deductibles: Even with Medicare, there are still copays and deductibles. Sometimes it may be a significant amount.
  • Financial Advisors: With multiple plans to choose from and many additional coverage options, speaking with a financial advisor may help you lay out your options, such as Medicare supplement insurance, advantage plans, hybrid policies, and benefits rider policies.

Medicare will not cover all of your healthcare expenses when you retire. It is best to explore additional coverage options. If there are more questions, a financial advisor can help you find the solution best for you.

Myth 4: “Paying Off All Debts Before Retirement is Always the Best Strategy”

Fact: Although it may be tempting to plan for the future by erasing as much debt as possible, it may not always be the most beneficial option.

Factors to consider:

  • Low-Interest Debt Opportunities: The debt-paying rush is not always necessary. Low-interest debts, such as mortgages, may allow for fund-redirecting opportunities that will allow you to put more toward investments with higher potential returns.
  • Prioritizing High-Interest Debts: Some debts are more beneficial to tackle than others. For example, rather than a little money towards multiple debt payments, prioritizing high-interest debts may lead to improved financial health and stability.
  • Finding a Balance: While repaying debt is a positive thing, there are other essential needs in life that need to be accounted for. It is important to find a balance so that debt repayment does not significantly impact your budget and other living expenses.
  • Interest Rates: Although debts do collect interest rates, sometimes the money it would take to pay off those debts could instead be invested elsewhere and collect even greater interest rates that go directly into your pocket. This means that even though you are not paying off those debts at the time, you’re still coming out ahead. Later when you do pay off this debt, you may have earned back some money instead of taking a full loss due to interest.

Paying off debt is important, but so is timing. Rather than paying it all off right away, that money may be repurposed into a better strategy.

Myth 5: “I Should Be More Conservative with Investments as I Approach Retirement”

Fact: It is important to make sure you have enough retirement savings for the future and not starting on those savings until you are closer to retirement age can be risky.

Advantages Of Starting Early:

  • Establishing Consistency: As life may throw unexpected circumstances your way, creating consistent saving habits early on may cushion those blows. This will help you maneuver around those financial setbacks and maximize your future savings.
  • Avoiding Reliance on Future Income: The future is not certain and anything could happen. Saving earlier is better. This will help you still will have future savings in the case of not being able to pay later on due to challenges such as job loss, economic downturns, and health issues.
  • Compounding Interest Growth: The earlier you start saving for retirement, the better chance you have of accumulating greater compound interest. This growth will allow for more savings to cash in on in the future.
  • Opportunity Flexibility: There are many different options for starting your investment. Starting planning early may give you an even longer list of options to choose from and will allow you to pick up new opportunities as they appear. This could lead to even more savings in the long-term plan.

Retirement savings are not just for those later in life. The earlier you start planning, the more opportunities you will have. 

Myth 6: “I Can Catch Up on Retirement Savings Later When I’m Making More Money”

Fact: Although you may not feel like you are able to afford much to put towards retirement savings, every little bit is important.

Factors to consider:

  • Developing Habits: Even if the money you can contribute to retirement savings is minimal, every little bit counts. Starting early is not just about the amount of money you are putting away, but it also encourages good savings habits that could be later built upon.
  • Living Beneath Your Means: While it is important to put money towards the things you love, sometimes it is best to take some of the leftover money not spent on essential living expenses each month and put it aside. Although it may not be something you feel like you need to worry about now, that money will contribute to what you are able to spend in a month in the future when there may be very little other income.
  • Returns Over Time: As mentioned a couple of times above, every dollar you invest into your retirement now has the potential of gaining more compounding and investment return power over time. The amount you are able to save is not the only factor. It is also the timing.

Although you may be still early in your career journey and expect to be making more money later on, saving early is still beneficial. It creates better savings habits and more potential to grow.

Myth 7: “Estate Planning Is Only for the Wealthy” 

Fact: No matter what financial situation you may find yourself in, estate planning is key to ensuring your possessions go where you want them to in the future.

Advantages to making a plan:

  • Asset Protection: Estate planning ensures that your wishes are carried out. This allows you to create a plan for what you feel is the fairest distribution of your property to your heirs or beneficiaries.
  • Conflict Prevention: The distribution of property after a loved one dies can often lead to fights over who gets what. Having this established ahead of time may allow for more family peace during a troubling time.
  • Tax Efficiency: When heirs or beneficiaries inherit property, they oftentimes inherit the estate taxes along with it. Setting a plan ahead of time can help minimize those taxes and make the situation less complex.
  • Tax Reduction Strategies: Estate taxes may also allow for future tax reductions. This can be done through the use of trusts and charitable donations to decrease tax liabilities.
  • End-of-Life Wishes: Everyone wants peace of mind after their passing. No matter what your financial background may be, estate planning may allow you to have that peace of mind by ensuring your wishes are carried out to those you care about most after you are gone.

Estate planning is not just for the wealthy. It reduces future conflict and offers peace of mind to those of all financial backgrounds.

Next Steps

When drafting your retirement plan, it is important to understand that there are many common misconceptions that could negatively impact your future. A few additional steps to make sure you have a retirement plan most beneficial to you are:

  • Reflecting on the Myths: Put your ideas on paper. This will help you remember what steps to take and what steps to avoid. This includes any of the myths above that may have stood out to you. Writing it down will reduce the risk of forgetting it later and will help you create a better plan.
  • Setting Your First Goals: Setting goals is important, but if you have too many at once, it could be overwhelming. Start by setting one goal you know is achievable and kick off your retirement planning based on one of the myths above. It could be as simple as learning more about the benefits of social security or starting to set aside small amounts to create good savings habits.
  • Sharing Your Plan with a Specialist: The final step to creating your ideal retirement savings plan is to run it by a specialist. Retirement Plan Specialists will discuss your plan with you and help you make any necessary adjustments. Because of their experience in the field, they may also be able to offer additional insights and suggestions.

While building a reliable retirement plan may seem complex or unimportant at the moment, understanding the common myths and misconceptions is essential. The earlier you start working on this plan, the more potential it gains.





30 Revealing Retirement Statistics & Facts for 2023 (medalerthelp.org)


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