It’s easy to tell yourself that you’ll be okay in retirement, especially when it’s still years away. But you get only one chance to save for retirement. If you arrive at retirement’s door without adequate resources, you may have limited options.
One way to help avoid mistakes is to do a retirement reality check: review the assumptions that guide your decisions to ensure that they are valid. Here are some common retirement myths that may be hampering your chances of reaching your retirement goals.
“I can work to augment my retirement income.” We’ve all heard the predictions that the baby boomers will redefine retirement by working past age 65. Indeed, holding a job later in life might have many health and societal benefits. But it could be risky to assume that you will have income from a post-retirement job. In a survey of current retirees, 40% had to stop working earlier than they had planned, usually because of layoffs or health problems. Another survey found that only about 27% of current retirees have worked for pay during retirement.
“My taxes will be lower in retirement.” Experts say that you will need a similar amount of income in retirement as when you were working. Even if you retired with 80% of your pre-retirement income, you may no longer have the benefit of large tax deductions for mortgage interest or dependents. Also, up to 85% of your Social Security benefits could be taxable, depending on your total income.
“I won’t need long-term care.” The risk of entering a nursing home after age 65 ranges from 20% to 49%, depending on certain variables. The national average cost of nursing-home care is about $70,000 per year. The real risk here is that if one spouse needs care, the cost could consume assets that the other spouse needs for living expenses.
If you are making faulty assumptions about your financial future, the results could be disastrous. Now might be a good time to test some of your assumptions to help ensure that your retirement preparations will lead to the retirement lifestyle that you envision.