If you’re a baby boomer who is nearing retirement, you want to be as prepared as you can possibly be. In doing so, you may start talking to fellow baby boomers and family members asking advice on how you can get the most out of your retirement. If you’re really concerned, you might even schedule an appointment with a financial advisor to plan your future out. However, there are a lot of myths about retirement that are perpetuated as common knowledge by people who do not know any better.
If you find yourself getting caught in the whirlwind of false promises and hopes, retirement can quickly become rather discouraging. It is better to be offended by the truth and take immediate action, than to live in a state of ignorant bliss and get a hard lesson from reality sooner – rather than later. It’s not easy spending the extra time planning your retirement, but the results will be worth it! You will not have to worry about running short of money or figuring out how to survive off of social security because you will have planned it out in advance!
Here are 7 common yet pervasive retirement planning myths that baby boomers get sucked into:
Myth No. 1: I won’t need a lot of money because I will spend less during retirement
This is the trap that many baby boomers will fall into year after year. When baby boomers are retired without the responsibility of a full-time job, there is more free time in the day to do what they like. This includes recreational activities, hobbies, and a generous amount of travelling. When you add in the increasing costs of healthcare and life insurance, you start to realize that things will add up very quickly. In addition, baby boomers have a higher life expectancy than they did in the past. Combine all of these factors and you realize that you will need a lot more money than you thought to make certain your money does not run out before you do.
If you look at the graph below, it is apparent that many baby boomers are shocked by how much they will actually need per year to survive for retirement when compared against their income.
Myth No. 2: My taxes will be lower during retirement
This one is very common, but popularity does not necessarily make an idea correct. In addition to the income that you will be living off of, which is taxable, you may find that you do not qualify for as many tax deductions as you did when you were younger. Things such as fully paid off houses, cars, and withdrawals from tax deferred investments will add on to the annual tax that you may have to pay.
Myth No. 3: If I don’t have enough money saved up, I can just work full-time like I always did
This is a good way of thinking positively about the future, but it might be overly ambitious. When you are going into your old years, there are many health-related misfortunes that can occur. This can come in the form of physical injury or sudden illnesses that render you unable to work. If this happens, you may quickly find yourself back into full retirement. Of course, people should try to work if they feel that it gives them purpose, and there’s nothing wrong with wanting to make money. However, do not make the mistake of attempting to work every year of your life.
Myth No. 4: Government-provided medical care will always be there for me
As you can see, the ever-increasing healthcare costs are the biggest concern for baby boomers. Even the most affluent see it as a rising issue that they may or may not be able to deal with. While you will find that a medical care program will help cover some of the costs, it won’t cover everything. At best, you will have reduced prices on the medications and treatments that you will have to pay for. As mentioned before, it is becoming more expensive over time to keep insurance for health care coverage, and there is no sign in the near future of this trend changing directions.
Myth No. 5: I can rely on the investments that I have made for my retirement
Some baby boomers will have a good portion of their assets placed into investments such as bonds, CDs, mutual funds and even individual equities in the stock market. Many baby boomers seem to be unable to reach a happy medium, and will either play the game too aggressively or conservatively. Depending on the direction that the stock market goes, baby boomers will realize that they do not have enough money in these investments to carry them through their retirement. Unfortunately, in many unforeseen scenarios, they will lose their invested money and end up worse than they started off if not properly protected and well diversified.
Myth No. 6: I will live in the same place for the rest of my retirement
Many baby boomers naively think that they will keep the same house forever. However, very few baby boomers will end up doing this. Most retired baby boomers will end up moving in areas of the city that provide more entertainment, or find a place that is closer to their immediate family. This is not due to a lack of discipline, but rather due to a change in preferences and priorities. There is nothing wrong with wanting to stay in the same home, but be open to the possibility of moving.
Myth No. 7: I don’t need to plan my retirement – it’s for rich people only, and I can start anytime
This is a form of procrastination that you do not want to indulge in. To save you years of regret and disappointment, you will find yourself in a situation where you are constantly anxious about how you will live for the next month. People who start retirement planning as early as possible are able to find areas of their financial life that need fixing, and solve problems before they evolve into something bigger.
In conclusion, retirement planning can either be the greatest thing that has happened to you, or one of the greatest inconveniences. It really comes down to having the right information at the right time, and executing on it right away. If you avoid buying into these myths and ignore the common advice from those who are unsuccessful with retirement, you will find yourself enjoying every single one of your retirement years! If you want to stop your baby boomer friends from falling prey to these myths, share the article and give them the information that they need!