You might want to retire early and have a relaxing post-work life on the beach, do a cross-country tour in a recreational vehicle, or have a cozy cabin in the woods. But without the right resources, you can’t bring these dreams to life.
Unfortunately, some common myths about retirement can stop you from taking your financial future seriously. The key to the retirement of your dreams is to plan now and start thinking about how to boost your bank account today so you can realize your dreams tomorrow.
If you want the retirement you’ve always imagined, start replacing these easy lies with reality.
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1. My Social Security benefits will be enough to live on
Social Security benefits were never intended to replace your entire pre-retirement income. You should expect benefits to cover about 40% of the money you earned while working, according to the Social Security Administration.
Perhaps your monthly check will be enough to live on, but probably only if you downsize every financial aspect of your life.
If that doesn’t sound appealing, you’ll need to save more money to cover more than your monthly Social Security payments.
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2. I don't need a financial advisor
Some soon-to-be retirees meet with a financial advisor before they stop working. If you aren’t in that category — either because you don’t want to pay for financial advice or because you think you can handle finances on your own — perhaps it’s wise to reassess.
Financial advisors do much more than help you create a budget for your retirement years. They can:
- Suggest safe investments as you get closer to retiring
- Guide you toward reasonable financial goals
- Offer advice about how to plan for major life events, such as the death of a partner or the diagnosis of a long-term illness
3. I don't need a will or trust until after I’ve retired
No one should wait until after retirement to create a will. If you have any belongings, property, or dependents, you must establish a will right away. That is true whether your retirement is four years away or 40.
Without a will, your state’s laws will determine who inherits your property and who takes care of your dependents. Your wishes about who inherits what and when can’t be honored unless you create a legally binding will.
Similarly, a living trust establishes a trustee who can oversee your assets after your death, which helps you avoid probate.
Most folks should create a will, but not everyone needs a living trust. If you do want a living trust, though, follow the same rule of thumb: Set it up as soon as possible, and definitely don’t wait until after you retire.
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4. I'll finally have time to travel once I’ve retired
While many retirees hope to fill their newly clear schedules with travel time, the reality of post-retirement life is more complicated. For starters, life in 2024 is more expensive than it was in 2019. Travel goals you set years ago might not be achievable today.
Travel also becomes trickier as you age due to the increased risk of health problems. The earlier on in your retirement, you can travel, the better. Putting it off might mean you never reach your dream destinations.
Pro tip: If you are healthy enough to travel, make sure to use one of the best travel credit cards , so you can get the rewards you deserve.
5. Medicare will cover all my health costs
Most U.S. adults age 65 and older qualify for Medicare. But while you can count on having health care access after you leave your employer’s medical benefits behind, your health costs won’t suddenly drop to zero. Far from it, actually.
For example, Medicare recipients are still responsible for premiums, copayments, and deductibles out of pocket. For many seniors, this adds up quickly.
6. I won’t need much income in retirement
Some of your expenses should go down once you’ve retired, especially work-related costs. But many other expenses will stay the same.
Some financial experts suggest that if you want to retire comfortably and maintain a quality of life similar to the one you enjoy now, you will need 80% of your pre-retirement income.
Make Money: 8 things to do if you're barely scraping by financially 7. If I need more money after I retire, I can simply get a job
As of October 2023, 19.3% of adults over the age of 65 were working. It’s definitely possible to get a job after you retire, but it might not be easy.
For instance, illnesses and the effects of aging can put physically demanding roles out of reach for senior citizens. Age-based discrimination is illegal, but surveys have found that a large percentage of seniors still say they’ve experienced ageism when attempting to return to the workforce.
Also, getting another job after you retire can impact your Social Security benefits. So, the costs of a new job might not be worth it.
8. My Social Security benefits won’t be taxed
If your post-retirement “combined income” totals more than $25,000 (for an individual) or $34,000 (for a couple filing joint taxes), your Social Security benefits will likely be taxed.
Combined income includes:
- Your adjusted gross income
- Tax-exempt interest income
- Half of your Social Security benefits
If you fall into this category, up to 85% of your benefits are taxable. Make sure you’re including taxes when creating your post-retirement budget, or you’ll end up with less money than you counted on.
9. I don’t need to plan for the future — things will sort themselves out
It’s fine to take small risks that push you outside your comfort zone, but it’s likely wise to use caution when planning your retirement.
Maybe the housing market will soar and you can retire entirely on the proceeds from your home sale. On the other hand, maybe the market will unexpectedly cool, leaving you without that extra cash.
It doesn’t matter whether good or bad luck lies ahead: You’ll be better able to weather life’s storms if you already have a solid retirement plan under your belt.
Avoid these money mistakes: 9 dumbest things smart people waste money on 10. It’s too early (or too late) to start saving for retirement
No matter how recently you entered the workforce or how close you are to leaving it, right now is the perfect time to start saving.
Retiring with any money at all is better than retiring with no money. So, don’t tell yourself there’s no point in saving based on how many years out you are from retirement. Start now.
Bottom line
Start planning your retirement around reality and avoid financial stress , so your golden years can be everything you hoped they would be and more.
Regardless of how much time you spend fantasizing about them, your bucket list items aren’t going to cross themselves off. On the other hand, with the right money moves you might even find yourself retiring sooner than you thought was possible.
One thing is for sure, believing these common lies about retiring won’t get you any closer to achieving the retirement of your dreams.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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