Retirement Mythbusters, Ep #99

Who you gonna call? Retirement Mythbusters!

Not as catchy as Ghostbusters, we know, but these retirement myths can be much more hazardous to your long-term financial health. Many of us have certain beliefs from internet rumors or family hearsay that are passed down about retirement rules of thumb. But believing in these stories could be detrimental to the long-term success of your retirement.

On this episode, we do our best Mythbusters imitation (of Discovery Channel fame) to bust these common retirement myths. Listen in to hear why you may want to challenge conventional thinking, and discover what it could cost you to continue to buy in to the hype. We also share a portion of Chad’s presentation on this topic in the video below.

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Retirement Mythbusters: 8 Common Retirement Myths

I’m not going to live that long. So many people don’t think they will live until age 90. But the truth is, men who are 65 today have a 20% chance of living until 90 and women have a 33% chance. Couples have a 48% chance of one of them making it to age 90. You need to make sure your money will last as long as you do. Does your financial plan cover you until age 90?
I’ll work until age 65. The actual median retirement age is 62. Many people plan to work longer, but they are forced into retirement early. Some people try out a second act. Whenever you do choose to retire, be sure that you are retiring to something, not away from something. Do you have big plans for your retirement?
Social Security will run out. Some people use this myth as an excuse to claim their Social Security benefit early. But claiming Social Security below your retirement age greatly reduces your lifetime benefit. If you delay until age 70 will result in an 8% increase per year! We also share information on the last Social Security reform in 1983 as well as discussions for how to tackle the often discussed 2034 potential shortfall.
Once I reach my Magic Number, I can retire. The reality is that everyone’s situation is different. There is no magic number! There is so much more to retirement planning. Planning year by year with customized expense assumptions allows for maximizing tax planning.
Paying the lowest amount of tax is always best. Are you trying to be too tax efficient? Think about optimizing your tax situation rather than minimizing your taxes. We break down an example, in the podcast describing how this could occur and strategies to avoid it. Consider working with a financial planner and an accountant to help you consider long-term tax planning.
When I retire my investments should be conservative. This isn’t always the case. People are living longer than ever so you may need your investment portfolio to last you 30 or 40 years. There is actually a bigger risk of being too conservative rather than risky.
I need to pay off my mortgage now. A mortgage is some of the cheapest money you can get in a loan. So not paying it off and investing the difference actually makes more sense financially. But for some people paying off their mortgage provides them with peace of mind. Which camp do you fall into? Would you prefer the peace of mind that a paid-for house provides?
Retirement spending is the same throughout retirement. Retirement planning is more complicated than you think. Your spending in retirement changes throughout the years. In the first 5 years of retirement, people spend a huge amount of money. You may spend it on travel, fixing up your home, eating out, or whatever it is that interests you. You finally have the time to spend all the wealth that you have built. Then spending slows down as you do. Unfortunately, retirement spending tends to increase the older you get, but this time it’s on medical expenses. Have you planned to spend the same amount each year in retirement?