It is rarely safe to make assumptions, especially when it comes to investing for retirement. While daydreaming can get you through a tough day at work, you don’t want your financial fantasies to ruin your retirement. Retirement planning is all about estimating what you will need to fund your ideal scenario after you stop working, but it also takes into account the unexpected. According to an article by thefiscaltimes.com, there are certain myths that can sabotage your retirement if you let them. With the help of a retirement investment specialist, you can identify any assumptions you have made about your retirement and tweak your financial plan and investment choices to reflect reality.
Don’t plan to work forever
Some pre-retirees in their 50s claim they won’t retire at age 62, yet that’s still the median age to retire in the U.S. Even if you want to work until you are 70 or older, your physical health could keep you from working. Also, unforeseen circumstances could lead you to move across the country. If you do find a position, it won’t pay as much as what you made in the past.
Don’t count on downsizing
Some people don’t max out their retirement contributions to a 403(b) or make the catch-up contributions starting at age 50 because they think their expenses will be lower in retirement. Selling your current home and buying a retirement home entails paying closing costs twice. Experts point out that 50 percent of pre-retirees don’t downsize. Even people who buy smaller homes want modern amenities that often cost more.
Don’t expect free health care
If you expect free health care when you are older, you may experience sticker shock at the pharmacy and doctor’s office. Experts say the average out-of-pocket costs most retirees pay is at least $1,800 per year. A retirement specialist will help you budget for medical costs as well as review any long-term health care insurance policies you have. Investing for retirement means you will have the money you need for health care when you aren’t working.
Don’t bank on social security
One Gallup poll revealed more than one-third of pre-retirees intend to rely on social security as a major source of income. Unfortunately, the average person’s social security check is about $1,200 a month. An article by investors.com reports social security benefits will likely be cut starting in 2017. Part of your retirement planning should take into account possible cuts to benefits. Experts say in 2022 and beyond, workers age 62 could see a 30 percent reduction.
Don’t order your tombstone
If you have a morbid philosophy about retirement, you likely tell yourself you won’t need to worry about it because you’ll be dead. In reality, people are living longer than ever. According to the fiscaltimes.com piece, 65-year-old men can expect to live to 86.6 years. Meanwhile, a 65-year-old female can expect to live to 88.8 years. Even if you suffer with medical conditions, the modern advances in health care will prolong your life.
Don’t underestimate the child factor
Most people love their children. Even if helping your adult children puts your retirement at risk, it’s difficult to cut off children. Retirement planners and wealth managers often advise their clients to show financial tough love. Realistically, you have to plan that you’ll continue to provide financial support to people you love. Investing for retirement with your children in mind will prevent any retirement shortfalls.
Don’t forget inflation
Failing to factor in inflation can ruin your retirement future. No one can accurately predict what will happen to the prices of gasoline, food and housing. Some other unpredictable expenses in retirement include property tax bills, home owner’s insurance and airfare or travel expenses.
At S.A.C. Investments, we pride ourselves on listening to our clients and understanding their individual vision for retirement. We help you make good financial choices so your retirement plans provide you with dividends and income. For more information on investing for retirement with annuities, bonds, exchange-traded funds and mutual funds, please contact us.