Having misconceptions about retirement can make you draft the wrong saving strategies which will, in turn, make your life harder during your golden years. The importance of knowing the truth about retirement can’t, therefore, be overlooked. For instance, you need between 65 and 90% of your pre-retirement income to maintain your current living standards. However, most people think they can do it with 50% or less. Some people also expect to keep working beyond age 65 however, less than 15% of today’s retirees manage to keep working past age 65. Most people planning to retire also fail to account for variable spending. This explains why retirement isn’t so rosy for many people. If you want to retire gracefully and avoid surviving on short term loans like payday loans, here are the top retirement myths you should beware of.
Myth 1: There is a magic number
Most retirement experts encourage retirees to save ”enough” and draw utmost 4% of their retirement savings each year to ensure the money lasts a lifetime. This 4% rule isn’t a universal rule. The rule works for retirees who have saved ”enough”. The 4% rule is also hard to follow given the fact that the lifestyle, health as well as investments of retirees vary. In a nutshell, there is no magic number because retirement plans and withdrawal strategies vary. For this reason, you need to focus on your own retirement as opposed to following figures which aren’t universally applicable.
Myth 2: You can work for as long as you want
Many people also make the mistake of thinking they can work for as long as they want. As mentioned above, most people think they can still work past age 65. However, very few people (15%) actually work past that age. There are also people who expect to keep working for the rest of their lives. This myth is detrimental because it stops many people from planning their retirement early. Ideally, you should start planning for your retirement during your prime age since this is when you can work and save the most. Furthermore, you may be willing to work as long as you want but there is no one willing to employ you. Health issues can also get in your way given the risks of falling sick are higher with age. This myth shouldn’t be used as an excuse for delaying to set up your retirement account.
Myth 3: You spend less in retirement
Many people have also been led to think that retirement life is cheaper and easier. This is far from the truth. Although retirees don’t incur expenses like transport costs incurred by the working population, you are not assured of spending less during retirement. Furthermore, things never get cheaper so don’t expect to pay less either. You also need to account for unique expenses such as health-related expenditures which are mostly unplanned for by most people. Retirees also face other emergency expenses like regular people. For instance, you can damage your car or an appliance. You may also get an unexpected house repair bill. If you don’t have a provision for emergency expenses already, you will have to turn to loans like payday loans or borrow from family or friend which eventually increases your spending. In a nutshell, thinking that you will spend less in retirement is a recipe for disaster.
Myth 4: You will live in your current house throughout retirement
Retiring when you have your own house is a great thing. However, don’t assume you won’t move during retirement. Although most people plan their retirement without considering moving costs, most retirees end up moving for one reason or the other. It’s better to make provisions for moving early rather than be forced to live in the same place for life.
If you care about having a great retirement, you should avoid falling victim to the above myths when you start or continue with your retirement planning process. Retirement planning should be customised to match your lifestyle. It should also be done as early as possible since no one is in control of their working years. You should also expect to spend the same amount of money you are spending currently or more as a precautionary measure. Lastly, don’t forget to make provisions for moving as well as emergency expenses to avoid relying too much on short-term emergency loans like payday loans.