5 Biggest Myths About Retirement
Planning for retirement can be extremely difficult, especially with all the myths surrounding what is needed for a comfortable lifestyle. There is no question the transition into retirement can be complicated, however if you’re smart and plan accordingly, it can be easy. The biggest obstacle to avoid is getting caught up in the falsities about how to prepare.
Not to worry, you’re in luck because the money myth busters at www.missmoneybee.com put together a list highlighting some of the biggest falsities about retiring. With the right guidance and careful planning, your retirement will be stress free and enjoyable!
5 Biggest Myths of Retirement:
- 1. $1 million is ENOUGH to live comfortably. With the cost of living continually rising and people living longer, a million dollars will no longer guarantee a five-star retirement. Yes, this is a lot of money but remember this is all you have to cover the remaining expenses for the rest of your life. Ideally, you want to have enough saved to support a comfortable retirement for 25 to 30 years. You need to sit and write down every cost that may arise including medical bills, healthcare, grandchildren, inflation, etc.
- 2. You will spend LESS once you retire. In theory this is a great plan and many think once they quit their jobs, spending will decrease. Unfortunately, this is often not the case as retirees tend to actually spend more when they first retire. They spend extra money on those things they have always wanted to do but never had the time to, such as traveling or taking up new hobbies.
- 3. SOCIAL SECURITY will take care of you. Social security is meant to be a supplementary source of income not a primary one. It should be thought of as more of a safety net to fall back on in case of an emergency. If you think about it, the average monthly social security check is about $1,200. If that is a person’s sole source of income, it would just barely put them over the national poverty line.
- 4. Put ALL your money in bonds and CDs (certificates of deposit). It is always a good idea to put some money away but only in moderation. When people put everything they have into bonds and CDs, it becomes a concern due to the effects inflation can have on one’s purchasing power. You also need to consider your investment horizon which is an estimate of when you plan to need the money and the probability of early redemption deals. Both savings bonds and CDs have early redemption penalties, so you need to consider this factor when deciding your retirement strategy. Also be mindful that now you must own a savings bond for at least one year before you can redeem it.
- 5. Medicare is all you will NEED for healthcare coverage. Medicare is a government program that provides medical coverage to anyone 65 and over, however it is not comprehensive. Retirees need to keep in mind that Medicare is not designed to cover everything. Many times it pays for only a portion of a doctor visit or treatment, leaving you to pick up the rest of the tab. Retirees need some type of additional coverage to supplement the Medicare policy gaps.