March 31, 2022

Don’t Be An April Fool:
Avoid These 6 Retirement Planning Myths.

April Fool’s Day is known for its fun and generally harmless tradition of trickery. While it may be entertaining to find out how gullible your friends and family are, it’s not always as fun to be on the receiving end of the joke.

Falling prey to pranks and misinformation on April Fool’s Day is understandable considering the point of the celebration. But keep in mind that the falsities don’t disappear on April 2nd, especially regarding financial advice and retirement planning. Maybe you’ve made a poor financial decision in the past – they’re not entirely uncommon. But sometimes, it’s not what you do with your money that can be foolish – but rather what you don’t do can dub you a fool.

Don’t be a fool this April.
Avoid these 6 retirement planning myths.

1. I can wait until later to start saving for retirement.

April Fools!  There’s no such thing as saving for retirement too early. Retirement today isn’t what it was for your parents and grandparents. Many people live 30 or more years after punching the clock for the final time. Saving early and regularly should be the standard. It’s putting off savings that can really bite ya in the you know where – and no one, especially not you, will be laughing at that blooper.

If your employer offers retirement savings programs (i.e., 401(k), 403(b), HSA, etc.), we recommend you not only participate but maximize the benefits. Bonus if there’s an employer match! Don’t pass up that free money. Every little bit helps. If you’re on your own to get a savings plan in place, reach out to one of our advisors to get started and hold yourself accountable. Remember, time is only on your side when you start early.

2. Medicare will cover my healthcare needs in retirement.

April Fools!  You’d be surprised how many people are confused about Medicare and what it does and does not cover. Let’s clear some things up… Medicare can provide you affordable health insurance coverage for doctor visits, medication, and hospitalization once you turn 65. That said, Medicare does NOT cover the cost of deductibles, copays, or long-term care (i.e., nursing home or assisted living that lasts more than 100 days). These costs are all up to you and add up quickly.

What does all this mean? Exactly what it sounds like… Medicare isn’t the complete answer. Talk to your financial advisor about planning for and integrating medical expenses into your retirement plan.

3. I’ll be able to live off my Social Security income in retirement.

April Fools!  Unfortunately, this goof is more common than it should be. If we’re being honest, relying on the government to take care of you once you’ve departed the workforce is equivalent to not having a retirement plan. What’s worse? There’s often a big gap between what pre-retirees think they will (or should) receive from Social Security and what they’re actually going to get. According to a recent study1, 1 in 5 Americans don’t expect to have an additional source of income in retirement. Current retirees receive $1,657 of monthly income from Social Security2 on average. That’s just under $20,000 a year to help barely keep the lights on and food in the pantry. Does that sound like an enjoyable retirement?

Think of Social Security benefits as your retirement dessert, not your main course. Check out your Personal Benefit Estimate from the Social Security Administration and work with your financial advisor to create a plan to maximize your Social Security benefits and spend them wisely.

4. If I need to, I’ll work through retirement.

April Fools!  You may have good intentions of working past age 65 if you need (or want) to, but sometimes life has other plans. Did you know that most early retirements are due to illness or injury? That doesn’t even account for layoffs or caregiving responsibilities for aging or ill family members. Have you ever heard the saying, “Your greatest asset is your earning ability. Your greatest resource is your time.” It’s true. Finding good-paying jobs later in life can be difficult, so we don’t recommend relying on being able to do so when it comes to your retirement plan. Earn and save now while you’re able.

5. I’ll spend less and pay fewer taxes in retirement.

April Fools!  Suppose you’ve got plans to travel, visit your children and grandchildren, and pursue your hobbies or other activities in retirement. You may spend more discretionary cash flow in retirement than you expect – or more than you’re currently spending. That’s not to mention any elaborate bucket list trips or activities you’ve been dreaming up and waiting for over the past 40-years.

Another misconception is you’ll pay less in taxes once you’re retired. But that assumes you’ll have less income. If your retirement income is the same as when you were working, you may not be in a lower tax bracket. Additionally, you may qualify for fewer tax breaks (i.e., mortgage and college savings deductions). Ask your financial advisor about savings tools or strategies to help you manage taxes now and in retirement.

6. I don’t need a retirement plan. I can do it on my own.

April Fools!  It can be tempting to DIY your retirement. After all, the internet makes it easy to DIY just about anything these days. But can you rely on the internet to take into account all of your assets (including your ability to earn) and unique personal circumstances, provide recommendations to maximize all your benefits and savings opportunities, and design a plan to help you achieve the retirement of your dreams? Will the internet hold you accountable to your plan and coach you out of acting emotionally every time the market swings? A professional can help you create a formal plan and focus on the long-term game.

Don’t be a fool this April or ever. You owe it to yourself to be wise with your finances and fill the gaps with professionals who can offer personal advice and guidance. If one or more of these retirement planning myths are threatening your retirement, let’s set up a time to talk so you can regain the confidence you deserve and look forward to retirement again.



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