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It’s time to Put These Retirement Myths to Bed

Whether it’s due to outdated information or just sloppy research, a number of long-held retirement myths you’ll find on the Internet are simply not true. Let’s set the record straight.

Myth #1: Plan to live into your 80’s?

According to the Social Security Administration, A man reaching age 65 today can expect to live, on average, until age 84.3. A woman turning age 65 today can expect to live, on average, until age 86.7. If you build a retirement plan based on those numbers, you may well run out of money. 25% of people are now living until 90 and 10% are making it past 95. And those numbers will keep on rising. If you’re younger than 65 and have a family history of good health, build a financial plan that lasts until at least 95 years of age.

Myth #2: I never plan to stop working.
I’ve met a number of clients that enjoy their work and feel that they work well into their 70’s and beyond. Truth is, we all suffer from a decline in mobility and cognition as we age, and you should build a plan that assumes you stop working by age 75. If you are able to keep working beyond that time, it’ll be a blessing, but shouldn’t be part of a strategy. 

Myth #3: Annuities are a rotten idea.

We’ve all heard the tales about annuities. Onerous sales commissions reaped by dubious salespeople. That’s a people problem, not an annuity problem. Fact is, there are a growing list of low-cost transparent annuities, which I discuss here. Often times, annuities can play a very helpful role in designing the perfect income strategies, in tandem with Social Security and other retirement benefit plans.

Myth #4: Once you turn 65, you don’t need to worry about healthcare expenses

Most Medicare plans carry co-pays and deductibles that can lead, on average, to more than $5,000 in yearly medical costs. Be sure you account for such costs in your long-term retirement plan.

Myth #5: Retirees should only invest in conservative investments

That was surely the case when the average retiree passed away in their first decade of retirement. Nowadays, a retirement portfolio may have to support you for two to three decades. And with that kind of time frame you absolutely need to take on greater portfolio risk to ensure that the portfolio can grow enough in value to support your plan. 

Myth #6: It’s best to take Social Security at Full Retirement Age (FRA)

The FRA is considered to be age 67. But know that for each year you wait to collect Social Security, your annual benefit rises by 8%. If you expect to live past 81-82 years of age, and can live wihtout the money, hold off taking Social Security until you are 70.

Myth #7: My taxes will be fairly predictable in retirement. 

With fast-growing government budget deficits now in place, the next wave of tax reform is bound to trigger tax increases. Make the right tax moves now to anticipate likely higher taxes ahead. A fee-only financial planner can help you devise sophisticated tax planning.