5 Retirement Planning Myths Busted (To Help You Plan Your Finances Better)
When it comes to financial myths related to retirement planning, there exists plenty. Thankfully, younger citizens are becoming more conscious by the day and are opening up to embracing less conventional financing options. However, even the most well-informed people can sometimes fall prey to some of the existing retirement planning myths. It’s high time we reboot our thinking process and break free from such shortsighted ideas today.
Here are 5 retirement planning myths that we really need to abolish as fast as possible.
Myth 1: There’s plenty of time to start retirement planning later
One of the biggest mistakes that you can commit is to procrastinate retirement planning. When someone in their 20s starts their career as a fresher, low income makes them think that it’s not feasible to start investing in retirement planning just now.
Well, this is probably the biggest mistake in your financial planning. People tend to think that when they start earning more at a later stage of life, it will be easier to spare money for investing in retirement plans. But they tend to forget that as they grow older, so do their responsibilities and expenditure. In short, it doesn’t get easier to start saving at a later stage of life.
Another important factor to consider here is that the later you start investing in your retirement plans, the more monthly investment you need to reach your target. It is easier to save $1000/month for 35 years than to save $3000/month for 15 years (and don’t forget about the amount of interest you’ll gain for the extra 20 years of investment).
Myth 2: I’ll inherit a lot of money from my parents/relatives
You might have rich parents or close relatives, but that does not secure your future as much as you think.
Firstly, you do not know when you will be able to inherit. It’s pretty possible that you are in your late sixties and they are still thriving and enjoying the fruits of their lifelong labor well into their nineties. In that case, you will not get any immediate benefit from their wealth.
Secondly, when they are not around anymore and you do inherit their property, you can never be sure of the amount. If your parents have lived throughout their eighties and their nineties, it’s pretty much possible that they have spent the major portion of their wealth on themselves owing to their luxury lifestyle, charities and other responsibilities, or even their medical expenditure.
In short, until you get your hands on it, you can never know how much you are going to get from inheritance. In any case, it’s not very prudent to depend on it and abandon saving up for yourself.
Myth 3: My monthly expenditure will decrease
Contrary to popular belief, your monthly expenditure will not decrease as much as you think. Many people tend to think that they will only need 50%-60% of their current income after retirement. But, unfortunately, that’s not true. Rather, your income will stop but your expenditure will remain almost the same. Vacations with family, joining a club, and attending social events are some of the few things that will require plenty of money.
And unless you have a solid health insurance plan, the skyrocketing medical costs will take another big chunk of your savings.
Myth 4: I won’t live much longer after retirement
This was true once, but not anymore. In the past, human lifespan used to be only 70-75 years, but with the blessings of modern medical sciences, it has significantly improved. A person with a healthy and active lifestyle can expect to live well into their late eighties to the early nineties. So, you need solid financial planning for at least 20-25 years of your life after retirement.
Myth 5: My spouse will take care of it
Depending on your spouse for post-retirement financial planning is not the best idea in the world. We don’t want to sound too negative, but of course, there are practical factors to keep in mind.
Firstly, things can go wrong in your relationship and you might end up being divorced.
If we still overlook the chances of that happening and believe you are going to live together happily ever after, there are still factors to consider. Most retirement plans work in a way that, if your spouse only covers himself/herself in their retirement policy, it will yield better payoff. But if they are opting for joint benefits, they will have to pay a lot more premium and the payoff will be lesser.
That’s why it’s a good idea to have individual investments for your spouse and yourself rather than opting for joint plans.
So, now we’ve busted the 5 biggest myths around retirement planning. We hope you make better decisions after reading this.