Six Myths About Retirement Planning

Retirement planning has gained prime importance largely due to changes in the lifestyle of people, an increase in life expectancy, the concept of nuclear families, and an urge to live independent retirement life without being financially dependent on children.

One has to be very cautious and meticulous while preparing a correct retirement plan to lead a financially comfortable retired life. Over this, there are many lies/myths surrounding retirement planning which need to be dispelled or they may hinder your progress in planning for retirement. Below are a few of them

  1. Too early to start saving in the 20s

It is a general myth that people can save later on in life for their retirement in their 40s. People think that since salary is low at earlier stages, it would be better to contribute bigger amounts when the salary gets fatter. Small savings in the initial years of employment in life is more beneficial than saving a large amount at a later stage in life.

  1. Social security will take care of retirement needs

During their careers, people generally do not bother about their retirement life as they think that social security benefits will take care of their retirement needs. This is very common with people serving in government departments. But, social security benefits don’t guarantee the same standard of living for a person in the post-retirement phase considering the inflation and the old structure of the defined benefit plan.

  1. You Need Less Income After Retirement

It is a myth that one will spend less money after retirement. It has been observed that people spend more money in the initial years of their retirement. This is the time when they freak out, purchase what they have been longing and do things they had been postponing due to their hectic work style during their career. They spend money on holidays, gifts and hobbies.

  1. Medicare will cover all health expenses

Medicare doesn’t cover all health-related expenses. There are many costs that are not covered under medical insurance and the burden of these costs falls directly on the person. Even medical insurance covers only a portion of doctor’s fees and treatment and not the entire treatment. These costs are estimated to be huge and must be considered well while preparing a retirement plan.

  1. Work Until Full Age Retirement

People believe that they will work until full retirement age which is 60/65 in most cases. But one cannot be certain that one will be able to work until the age of 65. It has been observed in many cases that one has to unwillingly take early retirement due to some untoward circumstances like health issues or shifting to another country. Thus one should start saving for their retirement from the initial years and must not rely on the savings of the last years of employment.

  1. Inheritance will cover retirement needs

If one is likely to inherit some fortune in the future, it does not mean that one should not bother about retirement needs. It can be likely that the inheritance could be used for paying off debts or building assets for future generations.