Things change. What worked as far as retirement planning for our grandparents and what we need to think about for our own strategic planning for the future is completely different. Let’s examine these 5 retirement myths and look at them not through the lens of the past – but a lens of the future.
I’ll have time to save for retirement later.
I’ll start saving once my salary increases. I really need to pay off my house first. Once my kids are grown and out of the house it will be easier to start saving. These are all things people tell themselves to justify procrastinating on beginning their retirement savings plan. In reality though, people are living longer than before. Retirement can last 20-40 years. The sooner you begin saving the better. If you grow your retirement savings at 10% compounded and wait just seven years to begin, you’ll end up with half as much money compared to starting today. That is definitely a motivator to start saving sooner!
Social security or my company pension plan will take care of me in retirement.
The further you are from retirement the less you should expect to receive from social security. You should plan to receive anywhere form 0 – 30% of your income from social security – depending on your age and what the actual relevance of the system’s future is. Most companies no longer offer a pension plan. Only 16% of current Fortune 500 companies offer a pension plan. The old-style company funded pension plan has now shifted to a defined contribution plan such as the 401(k) where the employee is responsible for saving for their own retirement with an employer match of contribution up to a certain percentage depending on the company. You, the worker, are the master of your own retirement fate.
I will only need 70% of my pre-retirement income during retirement.
According to the Employee Benefit Research Institute, 52% of retirees surveyed spent 95% or more of their pre-retirement income during retirement. Once you retire you will have the free time to vacation and travel. You may see that you spend more during the first several years of retirement and then less in the latter years due to inability to do extra activities due to diminishing health and aging. You must ask yourself questions such as: What age do I intend to retire? Where do I plan to live during my retirement? Will I still carry debt during retirement? What activities do I hope to participate in during retirement?
If you no longer have a mortgage or other debt payments, then you may be able to live on as little as 35% of your pre-retirement income.
I will no longer work when I retire.
Anymore, you can face as much time in retirement as you did in the work force. Will you want to work for 30 years and then just do nothing at all? Perhaps you will want to transition into retirement by finding work that is enjoyable and fulfilling. Will your nest egg be enough to get you through? Possibly you will want to find something part-time to supplement your retirement income.
I have to retire at 65.
You don’t. You can retire at 35 if you have the financial means. Or you can work for many years beyond 65. Many people can’t imagine not working. It brings them personal fulfillment. By strategically planning your retirement you give yourself the option of choice.
The sooner you begin to plan and prepare for retirement to more options you will have when the time to quit working. And you will have a choice to quit or just keep plugging along.
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