Tuesday, May 27, 2014
Here are a five retirement myths everyone should know about:
- You will likely retire earlier than expected. One of the most critical variables determining the size of a retirement is the number of years money is saved before withdrawals begin. According to a recent survey by the Employee Benefit Research Institute, 22% of workers say that they expected to wait until age 70 to retire, but only 9% of retirees actually retired at that age.
- Getting back into the workforce is difficult. Retirees often find it difficult to find new work. Two-thirds of retirees say they plan to work in retirement, but only 27% report actually doing so. For some, health issues prompting retirement limit their ability to work.
- You will regret buying a second home. Advisers say, don’t, “Our experience with the second home has generally been that they are expensive, a hassle and a mistake.” The challenge becomes greater as retirees age and are less able to take care of both homes.
- Medicare does not cover everything. People wrongly assume that once they pass 65, Medicare will deal with their problems. However, this is not the case. Traditional Medicare covers on average 48% of an enrollee’s health costs. Retirees still must pay deductibles, which can quickly run up the tab.
- You may have an unrealistic budget. A large part of retirement is figuring out how much money to allocate for your needs. Advisers say retirees do not account for the general rise in out-of-pocket spending, especially when they are young and healthy. The key is to build extra room into the budget, then later in life, allow for higher medical costs in a plan.
See Tom Lauricella, Five Myths About Retirement, The Wall Street Journal, May 24, 2014.