For many, retirement can feel like fiction — an elusive reward at the end of a long career rainbow that’s more make-believe than reality. But believe it or not, retirement is both financially possible and within your reach. You just have to be smart about saving and disregard the misconceptions and myths about retirement that can hold you back. Here are seven of the most common retirement myths.
Myth 1: It’s Too Late to Start Planning for Retirement
While it’s true that the more time you give your money to grow, the greater the potential retirement reward — it’s never too late to start saving. If you feel like you’re getting a late start on retirement, don’t waste another minute. Start saving now! You can make up for the lost time by trying to live on less and allocating just a little more of your monthly income toward retirement. In fact, if you’re older than 50, you may be able to contribute more than other workers to certain retirement accounts.
Retirement Myth 2: A 401K Will Save the Day
A 401K is a great way to save for retirement, but by itself, it’s probably not enough. If your employer offers a Traditional 401K (contributions are taxed at the time of distribution) or a Roth 401K (contributions are taxed before they go in your account), you should take full advantage. Contribute the maximum amount that your employer will match to get the most out of your 401K. Many financial experts recommend setting aside 15% of your monthly income for retirement. For most, that means saving money in other retirement accounts, on top of your 401K, like a traditional IRA or a Roth IRA.
Retirement Myth 3: Social Security Will Cover My Retirement
You should view Social Security as a supplement to your retirement savings, not your sole means of retirement income. A lot has been said about the stability and actual security of Social Security, but putting all that aside, the average retiree collects less than $20,000 of Social Security a year. It’s a nice start, but probably not enough to help you live the good life in your golden years. Save as much money as you can through your 401Ks, IRAs, and other retirement accounts, and plan to be pleasantly surprised by any additional income Social Security offers.
Retirement Myth 4: You Can Never Afford Retirement
Instead of planning for retirement, some people just plan never to stop working. While that’s fine in theory, it’s not always practical. You never know what the future has in store and you may find yourself unable to work for as long as you plan to. It’s understandable that saving enough money for retirement can feel like a daunting, undoable task. But no matter your age or income, a comfortable retirement is within reach. Do some research on the right retirement accounts for you and find ways to budget your monthly income to make retirement a priority. With the right plan and patience to help your money grow, you can afford retirement.
Retirement Myth 5: You Can’t Retire with a House Payment
Eliminating debt is a smart part of any retirement plan. Reducing your debt, especially high-interest debt, can help you put more of your money into interest-earning retirement accounts. But when it comes to your home, you can look at debt a little differently. It’s reasonable to account for an affordable home payment after retirement. Just make sure that you plan for that extra mortgage expense as you save.
Retirement Myth 6: Everyone Needs to Save a Certain Amount
Contrary to what some say, there’s no magical number or specific amount that you need to reach before retiring. In fact, everyone’s retirement plan will look a little different. Ask yourself what you want to accomplish in retirement — what you want to do, how you want to live — and plan accordingly. Your individual retirement goals are within reach, just be smart about saving and make a plan that’s unique to you.
Retirement Myth 7: Medicare Will Cover My Medical Expenses
Medicare will pay for many healthcare costs, but you’ll have to factor in some medical expenses on your own after you retire. While Medicare covers many medications, doctor and hospital visits, you still have to pay for deductibles out of your own pocket. Plus, long-term care is not covered by Medicare. Consider looking into long-term care insurance and/or a policy that will include a Health Savings Account (HSA) to help you plan for these additional expenses. While it’s difficult to predict exactly what your health needs will be, you can plan ahead to make sure you’re covered and comfortable in retirement.
There’s a lot of information out there about retirement — some good, some bad. Focus on the facts and filter out the myths and misconceptions that can discourage and derail your retirement. With the right information and the right resolve, you can make your dream retirement a reality.