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When planning for retirement, you’ll probably hear a lot of different advice from friends and family. There is also a wealth of information on the internet. Not only is some of it confusing and contradictory, some of it is actually incorrect!
There are a lot of myths about retirement finances that many think are true, and so continue to spread their own guidance based on these myths. However, if you are aware of some of the most common myths about retirement finances, you can easily dismiss the false information and plan better for your retirement savings.
While having enough savings or investments before you retire is definitely a good thing, there is no magic number that you must accrue. Everybody’s lifestyle is different. It is really only important that you have enough saved to be able to support your current lifestyle, or something similarly close to it.
You can figure out this number by determining how much you actually spend over the course of the year on your expenses and activities. Then you can further adjust the number by determining how much you think you might actually spend on these things when you retire. For example, if you are going to move to a smaller house, or stop participating I certain activities, you can likely reduce the amount you would need for retirement.
This is partly true, but also deceiving. You will, in fact, be eliminating some expenses; namely the ones that come out of you paycheck each month and other taxes. But at the same time, you might also be increasing other expenses when you engage in more leisure activities. Plus let’s not forget about rising healthcare costs.
You can certainly build up a good deal of wealth for your retirement with your 401(k) plan, but even maxing it out each year will never provide you with finances that equate to a six-figure salary. If you are currently making a sizable income and expect to maintain a similar financial lifestyle during retirement, you’ll also need to look into other forms of investment, such as a brokerage account.
Although it would be great to be debt-free when you retire, it isn’t completely necessary. You just need to factor in how much your monthly mortgage payment is going to affect you when you deduct it from your retirement savings. Additionally, you can always refinance if the interest rates are favorable, or sell the home, move to another, and gain some cash to add to your retirement or investments.
For many, this is true; but it’s not always a guarantee. You may find yourself taking on a part-time job if your retirement savings aren’t quite enough. Or you may also just enjoy working. The point is, never say never.