Myths about US retirement that can cost you dearly
Some people believe in retirement myths. For example, about how much they will spend and where they will live, but at the same time they do not realize that in reality everything could be different. By the time they know the truth, it will be too late to make adjustments to the retirement plan. To prepare you for unexpected turns, edition Money Talks News debunked 6 popular myths about retirement.
You can always work longer if you don't have enough savings
It is not uncommon for people to think they can just postpone retirement or work part-time if they have meager savings. According to the 2021 Retirement Confidence Survey, 72% of workers think they will continue to work after retirement.
Reality: while most workers think they will still receive their paycheck after retirement, in fact, according to the survey, only 30% of retirees actually worked for paychecks. What's more, the study found that nearly half of retirees quit their jobs earlier than expected.
Some people may retire early because they have the financial means, but health problems, layoffs, or family needs can crowd out others ahead of schedule.
Your Social Security benefits will cover all your expenses
The study found that 87% of workers and 92% of retirees expect social security to be a source of income upon retirement. According to a study by the Transamerica Center for Retirement Research, 69% of baby boomers believe that social security will be their main income.
Reality: certainly, many workers rely on social security to pay most or all of their bills. But if you plan to do this, you may need to change your lifestyle. The Social Security Administration states that these benefits were never intended to completely replace your pre-retirement income.
If you start receiving benefits when you reach full retirement age in 2021, Social Security will only cover about 28% of your pre-retirement income if you earn good money. According to government figures, this percentage is 42% for middle-income people and 78% for very low-income people.
You won't pay much in taxes after retirement
When you leave work, you hope that big tax bills will be a thing of the past. The problem is that many retirees ignore the tax liabilities that may arise from their retirement income.
Reality: if you have a traditional IRA or 401 (k) account, you will need to pay income tax on all of your withdrawals. You will not be able to avoid paying tax if you postpone withdrawals indefinitely, since the government requires minimum payments from 72 years of age.
Plus, your Social Security benefits may be taxed if you earn too much from multiple sources of income.
You will spend significantly less after retirement
Retirement saves you the hassle of commuting, shopping for business clothes, or working lunch. However, this does not mean that your costs will be significantly reduced.
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Reality: According to the 2020 Bureau of Labor Statistics survey of consumer spending, people aged 65-74 spent an average of $ 52 last year. This is a significant amount of expenses, and probably more than many expected before retirement.
You can live in your home throughout your retirement
For many people, aging in their own home is the preferred way to live out their golden years.
Nearly 2021% of Americans age 90 and older want to age in the home they grew up in and do not want to move into institutions, according to a 50 survey by Capital Caring Health, a nonprofit elderly care organization.
Reality: people have the right to want to age at home, but this is not always possible. The nonprofit United Disabilities Services Foundation says only 1% of homes in the United States are equipped for the comfort of the elderly. Perhaps this is one of the reasons why 37% of citizens of this age category receive medical care in special institutions.
Medicare will cover all of your medical expenses
Failure to plan for your health care costs can hinder your retirement. Medicare provides health insurance to millions of Americans age 65 and older, but it cannot be expected to cover all of your costs.
Reality: depending on your Medicare plan, you may not have coverage for dental care, vision care, or hearing aids. Plus, no Medicare plan will pay for ongoing long-term care. Overall, Fidelity's health care cost estimate suggests that a couple retiring at age 65 in 2021 will need about $ 300 to pay for medical expenses upon retirement, and this does not include long-term care costs.
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