Breaking Down 6 Common Retirement Planning Myths
While there are many factors that play into when you will be able to retire, the average age for retirement in the U.S. is 65 for men and 62 for women. It’s commonly recommended for most people to start saving for retirement early, providing as much time as possible to encourage your money to grow. However, when it comes to planning for retirement, there are many misconceptions. If you have questions, the financial advisors at Harvest Wealth Partners are available to assist you in planning for the future ahead.
Understanding retirement misconceptions
When planning for retirement, it’s important to understand some of the factors you will need to account for in the future. Common misconceptions about retirement tend to involve not only how much money you are likely to need for expenses and a comfortable life, but where that money will come from.
- Tax Considerations for Changing Circumstances: Most people assume that their taxes will be lower after they retire, but this is not always the case. The taxes that you will end up paying really depend on your circumstances and lifestyle. Factors such as moving (as many do in retirement) or losing dependents and other federal deductions can result in paying higher taxes overall than before you retired.
- Saving Outside of Social Security: While Social Security can end up covering a significant portion of your retirement income, most people end up needing additional savings. According to the Teachers Insurance and Annuity Association (TIAA), Social Security only covers about 40 percent of the average person’s needed retirement income.
- Understanding How Much Money You Will Need: One hurdle that many people face when planning for retirement is understanding how much money they will need before they can stop working. It is commonly recommended that you replace between 70 and 90 percent of your income for each year, including the money you receive from Social Security. However, this number really depends on your lifestyle and expenses. Experts cited by U.S. News & World Report suggest that this number can be lower if debts such as a mortgage are already paid.
- Estimating When to Retire: Many people have assumptions about when it is most effective to retire, but the reality is that there can be a lot to consider. It’s possible to take Social Security as early as 62, giving you more time to collect benefits, but the amount for your benefit will go up if you wait until the full retirement age. That in mind, it isn’t uncommon for people to retire sooner than expected as a result of health, job changes, or the need to care for other family members. This adds another layer of complications that can require additional planning.
- Thinking About Healthcare: When discussing how much money you will need in retirement, it’s also important to factor healthcare into the equation. For many people, healthcare costs can be unexpectedly high, making it more difficult to predict how much you will want to save.
- Saving Sooner: While it is never too late to start saving money, many people avoid doing so in order to pay other debts or manage their normal expenses. However, even investing small amounts into retirement can be done with the hopes of helping your money grow. If you aren’t sure where to start with saving for retirement, you may wish to consult a professional to discuss your options.
Planning for Retirement with Harvest Wealth Partners
No matter your level of experience with planning for retirement, you may have questions. The financial advisors at Harvest Wealth Partners will work with you to develop a retirement plan that is appropriate for your situation, and can discuss any concerns you have about planning for your financial future. Contact us today to schedule a consultation.