Myth #1: I’ll Spend Less in Retirement: Many people investing in retirement portfolios are told to plan for around 70-75% of their current spending. You can dispel this myth with a little budgeting. Why would your expenses decline that much in retirement, especially if you plan to travel or take on new projects? Instead, plan for your expenses to be closer to 95%. Sure, you might skip that morning latte on the way to work, but you may also have a desire to do other things.
Here’s an example to illustrate why you may want to plan to spend more: Imagine your daughter moves to Arizona shortly after you retire, and your first grandbaby arrives a year later. You’ll want the funds to take a trip a few times a year to see your growing family.
Myth #2: I’ll Retire Promptly at 65: Many people target the age of 65 because of social security and practices around traditional pensions. But a lot of things can happen, whether it’s downsizing, a health issue or the need to care for a loved one. Investing for retirement works best when you plan for a variety of scenarios, not just your ideal.
Myth #3: I’ll Just Use Medicare: Medicare works great for some things, like hospital stays or routine doctor visits, but it doesn’t cover long-term care. Home health or assisted living won’t be covered. You need to save for medical care, with a goal of saving around $265,000 for the average couple.
Myth #4: I Need to Prioritize Saving for the Kids’ College Tuition: You likely haven’t heard this from a financial advisor but through dinner conversation with friends. Many people make the mistake of feeling too much responsibility for their kids’ college tuition. Here’s a thought that may help you abandon this myth: your kids can get a loan for college, but you won’t be able to get a loan for retirement.
Myth #5: Once You Retire You Won’t Be Working Anymore: When investing for retirement, many people in their working years assume that when they retire they won’t have a paid job anymore. But increasingly, after retirement from full-time positions, retirees are heading back to work part-time doing new things in areas they’ve always been interested in. This not only provides a new experience but also a little extra income.
These are just a few of the myths surrounding investing for retirement. If you’re unsure whether the advice you hear on the street is sound, contact us at Lawson Kroeker. We can help you separate fact from fiction and develop a strategy for preserving and growing your wealth for a rewarding retirement.