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When it comes to retirement planning, many myths are circulating regarding how individuals can spend now and save later, or that their Social Security income will be enough to replace their income. However, neither of these realities are true. We’re going to go over five myths about retirement finances to help you prevent making mistakes with your financial future.
Once people retire, one of the most common retirement myths is that they’ll only need approximately seventy or eighty percent of their pre-retirement income. The main reason behind this belief is because there will no longer be the need for commuting, career wardrobes, or other job-related costs. However, upon retirement, additional charges will incur including travel expenses, eating out, and other activities.
While this dollar figure is one that’s been floating around for years, it’s untrue for a myriad of reasons. The first reason is that it could be too low of a figure for the retirement you’re considering. The second reason is that, for the majority of Americans, saving up this kind of money is too challenging to achieve. Therefore, it’s critical for individuals to think about an achievable figure and begin working toward that goal.
One of the most significant mistakes retirees make is believing their health coverage is taken care of by Medicare when, in fact, much less coverage is available than they realize. For example, Medicare doesn’t cover long-term care, prescription drugs that are self-administered, routine eye or dental care, dentures, hearing aids, or routine foot care. Because health care costs add up quickly, and there are gaps in such coverage, this area can be where retirees see the most financial devastation.
When people retire, they should be making financial plans up to and throughout their retirement. Financial planning doesn’t end when you retire. Instead, this is another savings opportunity because individuals are living longer. Therefore, retirement preparation should include cash flow management, estate planning, tax efficiency, and wealth enhancement.
Begin planning for retirement finances now to help avoid financial devastation later. Keep in mind that Medicare, Social Security, and small savings accounts aren’t enough, so it’s critical that strategies be put into action immediately.