8 Myths About Retirement Age
An estimated 25% of American non-retirees have no savings for their retirement age. Why is this the case? Perhaps they believe many of the retirement myths that make it look like old age will be a cakewalk money-wise.
This is far from the case. Managing your finances in your golden years can be an incredible hassle. The situation is made even worse if you haven't been saving for your retirement ahead of time.
Don't be fooled. Read on to learn about eight common retirement myths and why they're not true.
1. I Can/Should Retire Early
Retiring too early can put you in a dangerous financial situation. It is possible, but you have to create very precise calculations for your future expenses. Then you have to make and save enough.
Even if you do, financial disasters are still possible. You could lose most of your finances to a family medical emergency, an economic downturn, etc.
You could also be unable to regain these finances through other means. Searching for a job can be incredibly difficult after you've been retired for some years. Many employers won't want to hire someone that has large gaps in their work history.
2. Social Security Will Cover My Needs
Social Security can be a great help for retirees. However, especially these days, it's very difficult for a retiree to live solely on Social Security benefits.
A person who reaches full retirement age in 2022 is only entitled to around $800 a month in benefits. On top of that, your Social Security gets reduced if you earn more than $51,960 that same year.
If you compare Social Security income with the average amount that Americans spend monthly, the gap is frightening. The average American household spends $5,577 a month. Therefore, a retiree needs another income source beyond Social Security.
3. Health Insurance Will Cover All My Health Expenses
Work-sponsored retiree health benefits are quickly becoming a rarity or facing reduction. It's becoming more and more common for Americans to handle their health insurance expenses themselves. This can be hard to handle in retirement age.
And while Medicare costs can cover a lot of health expenses (click here for a good example: https://www.trustmedicare.com/does-medicare-cover-stair-lifts/), it, unfortunately, doesn't cover everything. A lot of studies have found that Medicare tends to cover half of a retiree's medical expenses.
To compound the issue, older Americans tend to need more medical treatments than younger ones. This fact can send the medical costs of retirees to sky-high levels.
4. My Retirement Age Will Be 65
The American government set the Social Security benefits to start at 65. Since then, 65 has always been the 'magic number' where everyone is expected to retire. However, many people retire earlier or later.
Many factors influence when a person retires. They may find that they can't afford to retire 'early'. They may also want to continue working.
Also, the life expectancy of the average person American has increased since then. The American government may increase the payout age for Social Security because of this.
5. I Will Stop Working During Retirement
There's no guarantee that you will spend your golden years in absolute relaxation. As mentioned, Social Security will likely not cover all of your daily expenses. It's also difficult to gauge the length of your retirement and your savings may not last.
However, this may not be because you need money. You may just want to work because you find the typical retiree life unfulfilling.
A lot of retirees find they don't want to pursue full-time leisure. They'd rather take on a second career or seek out part-time work. With the financial boost of Social Security and their retirement fund, this work can be something they enjoy.
6. My Family Will Take Care of My Retirement
It's never a good idea to rely solely on your inheritance to fund your retirement. There are too many unstable factors that could lead to you winding up with little to nothing.
For all you know, a sudden medical or economic emergency could wipe out all of their finances. The relatives ahead of you can also wipe out their fortune on a spending spree.
You also have to trust that they'll leave it all to you. It's easy to trust that your family is going to want you taken care of after you're gone. However, you may be misjudging them.
7. My Social Security Benefits Are Not Taxable
You may have to pay taxes on your Social Security. If you rely solely on Social Security benefits, you probably won't be taxed. However, if you have supplemental income, your benefits may be included in your tax obligations.
It all depends on how much you make. There are different limits that the total of your benefits and personal income need to reach. Once your income passes that threshold, both your benefits and income are subject to taxation.
8. It's Better to Focus More on My Children
It is tempting to save for your children's futures first. After all, there will be plenty of time to save for your retirement after your children become adults. However, depending on your financial situation, this may not be a good idea.
Keep in mind that your children have a lot of financing options for college, etc. They can look into such options as grants and scholarships. It's much harder to plan for retirement finances.
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Most people picture retirement age as a happy and carefree time. This can be true in part, but it's not the full truth.
Be sure to do plenty of research on what you're going to need for your retirement. Then plan for your retirement needs and execute them as best as you can. Only then will a secure and comfortable retirement be mostly guaranteed.
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