There are far too many money myths and misunderstandings that can sabotage your retirement if you don’t know the truth. Before we start addressing these myths and misunderstandings, it’s best if you have a little background information.
A 2019 GOBankingRates survey discovered that 64% of Americans will retire broke and 46% of respondents had $0 put aside for their retirement.
It’s Never Too Late To Start
While it’s always a good idea to start saving and investing early in life due to the benefits of compound interest and rate of return, it’s never too late to start. Most people in their 50s typically have more money to contribute to a retirement savings plan than those in their 30s who are raising a family and buying a home.
Medicare Will Pay for My Healthcare
HealthView Insights reports that the total projected lifetime healthcare cost for a 65-year-old retiring with Medicare coverage and supplemental and dental insurance would be $321,994, as of 2017. According to these projections, that number will grow to $404,523 when deductibles, hearing, vision, copays and dental cost sharing are added in.
If you aren’t seriously making an effort to fund a retirement savings plan now, it’s quite possible you will not have enough money saved to cover basic health care costs — even with Medicare paying for a portion of the costs.
Making Up for Missed Contributions
If you are waiting for a higher-paying job, higher interest rates for savings (CDs) or higher rates of returns on equity investments, that’s a big mistake. If you expect to generate any type of benefits from savings and investments, you need to start saving as early as possible.
The ‘secret’ of compound returns is time. The longer you wait the less benefit you will receive. Even waiting one year can make a huge a difference.
Aversion to Stocks, Bonds and Mutual Funds Due to Risk
This is particularly true if you are within 10 years of retiring. Your past history of an unsuccessful track record of investing in the equities market may have you fearful but you can still earn good returns on certain types of investments as part of your retirement planning strategy.
If you’re close to retirement, it’s likely that you won’t be interested high-risk or high-yield investments in case the stock or bond markets don’t produce the results you need by your retirement date. If you are close to retiring, you still need to make some low-risk investments to boost your annual rate of return on your total retirement fund because fixed rate saving/investment plans cannot get you where you need or want to be financially.
Thinking That You Will Be Able to Live Well On a Reduced Income
If your excuse for failing to save and invest for your retirement is that you don’t really need all that much money to be happy or to live on once you retire, you could be setting yourself up for failure in your retirement years when you no longer receive a paycheck.
Consider the effects of inflation and any changes in your spending habits in the years following your retirement. If you plan on traveling, buying a new retirement home, or relocating to a better climate, it’s likely you will need extra money to make those plans come to life.
Your Health Insurance Will Take Care of Any Serious Illness or Injury
If you are diagnosed with a critical illness (cancer, kidney failure, lung disease, etc.) or get into a serious accident, there’s a good chance that your health insurance policy will deny certain ‘unauthorized’ items of care or only partially pay for certain health care medications, treatments and other expenses.
An event like this could leave you in (medical) debt for many years to come … maybe for the rest of your life.
You’re Far Too Young to Think About Retirement
Millennials and younger generations can accumulate large retirement savings if they start early. Each year you wait costs you dearly at retirement.
It’s never too early to start saving and investing for your retirement. If you’re young, time is on your side to accumulate wealth by saving and investing faithfully and frequently. Putting away a little money often when you’re young will add up to a lot when you retire. Time makes all the difference!
A lot of the myths presented above can be overcome by being educated about the realities … and not basing your plans on assumptions or incorrect beliefs. You will never hurt your financial well-being by learning and keeping current on what’s going on with your retirement plan — during the accumulation phase and during your retirement.