Retirement Planning Myths You Should Ignore

Retirement takes a lot of planning and even more saving. Whether you’ve just started saving or you’re a few years away from retirement, you need to be properly prepared. Even if you think you’ve properly planned there are a number of retirement planning myths that could keep you from reaching your retirement goals. Check out the facts behind these retirement myths to discover how you could be preparing better.

Myth: My company and the government will pay for my retirement

Fact: Years ago company pension plans were more common and could be factored in as a source of income during retirement. However, defined benefit pension plans are becoming less and less common and if you’re one of the lucky few who’ll receive this benefit, you should still question its stability.

As for the government, the further you are from retirement the less money you should anticipate to receive from the government in the future.

Myth: My inheritance will cover my retirement

Fact: Unless your parents are extraordinarily wealthy and their health is quickly diminishing, it’s best to not plan your retirement on what you may or may not inherit. Life expectancies are going up meaning your parents might use all of their retirement money before they pass. To be safe, start saving now so you can have your own nest egg to rely on.

Myth: My spouse will pay for my retirement

Fact: It’s great to act as a team and rely on your spouse for your retirement needs. However, if your spouse has been the sole contributor to the retirement fund and death or divorce separate you then you’re on your own. You’ll both need to contribute to your retirement accounts in order to have a steady income when the time actually comes to retire.

Myth: I only need 70-80% of my pre-retirement income during retirement

Fact: When people are planning for retirement they often think they’ll spend less when they’re finally off the clock. However, retirees actually spend more money in retirement due to active lifestyles and travel. According to the Employee Benefit Research Institute, 52% of retirees surveyed spent 95% or more of their pre-retirement income during retirement.

Myth: It will be easier to save when I’m older

Fact: More and more of your retirement is going to be based off how much you contribute. The sooner you start, the less you’ll have to save each month later on to reach your goal. If you wait to save you’re basically throwing away the power of compounding interest, which is your most powerful tool to achieve financial security in your retirement.

Myth: I’ll be in a lower tax bracket when I retire

Fact:  There’s no guarantee you’ll be in a lower tax bracket when you retire since income from traditional retirement plans is fully taxable, and social security is taxable if your income exceeds certain levels. So if you’re hoping to save a few bucks in retirement this way, don’t plan on it.

Rely on yourself

Relying on yourself for a comfortable retirement is your best plan. Start saving now and diversify your accounts by contributing to Roth IRAs, 401Ks, and other retirement vehicles. Build up your own nest egg and don’t listen to these common myths.

What are common retirement planning myths you’ve heard?