Those of us preparing for retirement may find our heads spinning with the deluge of advice received from friends, family, co-workers, and financial planners. And with millions of Baby Boomers approaching retirement age, it is important to sort through this advice and develop a solid plan to move forward. William Lynott of bankrate.com interviewed professionals from the financial industry and has developed a list of what he believes are the most common myths about retirement. These tips could help you decide on the best way to proceed with your retirement planning:
- One million dollars will be enough.
- You’ll spend less money after you retire.
- Social Security will take care of you.
- Put all your money in bonds and CDs.
- Medicare is all you need in retirement.
With an ever-increasing cost of living, one million dollars does not go too far nowadays. In the past, this figure has provided a comfortable retirement, but financial professionals are now warning against under-saving. You may want to plan on adding a bit more to your nest egg before you retire.
Many people may plan on tightening their purse strings after they retire, but they may not always be willing to do so when the time actually comes. Early in retirement, you may have a desire to enjoy the time off with activities such as traveling, pursuing hobbies, and spending time with family. All this can add up to a lot of money spent on plane tickets, meals, and anything related to your chosen hobby. You may want to plan for an initial period of increased spending, or try to be frugal and save money for later in retirement, when you may need it for medical bills or other expenses.
Social Security checks were never meant to be the only source of income for retirees, but many people are banking on the system to provide for them when they stop working. It is important to realize that the average Social Security recipient makes less than $30,000 annually from the program. Most people would agree this sum would not provide a comfortable lifestyle, especially for those with medical problems. Even with cost-of-living adjustments, Social Security will not be able to cover everything you need in retirement, so you should plan on having other sources of income.
These types of investments are considered to be safe by the majority of people, but they may not be considering other factors like inflation. With today’s rock bottom interest rates, your bonds and CDs may not be able to keep up with inflation.
While this program does cover a great deal of medical expenses incurred by retirees, it does not cover everything. For example, Medicare provides nothing for assisted living or nursing home stays, something many retirees will need later in their retired years. You may need a Medicare supplement policy to fill in the coverage gaps. Unfortunately, these plans can be expensive, so it is a good idea to set aside a bit extra.
This list may seem to be full of grim facts, but it is not intended to frighten you. Retirement is something we prepare for our entire working lives and we must realize that not every bit of advice should be taken to heart. The economic situation in America is rapidly changing, so the old axioms may no longer hold water. Make sure you speak to a financial planner to make sure you’re getting the most current information so you will have the best possible chance of retiring comfortably.