6 Common Retirement Myths You Need to Avoid

Skip West

Whether you’re just starting to plan for retirement or working towards your dream for years, there are many common myths about the subject that you’ll want to avoid. Regardless of your situation, there are a few steps you can take to ensure that your financial future is secure and you’ll be able to enjoy the lifestyle you’ve always wanted in retirement.

Social Security income isn’t enough to enjoy a comfortable retirement

If you’re planning for a comfortable retirement, it’s essential to remember that your Social Security income needs to be more. A typical retiree needs $8,000 a month after they stop working. But some people may need more than this, while others can live on just 50 percent of their income.

To find out how much you will need in your particular situation, it’s best to talk to a financial planner. These professionals can help you plan for your goals, assess risk tolerance, and budget for retirement.

The federal government collects Social Security taxes on your income. This tax is automatically deducted from your paycheck. It’s then invested in special U.S. Treasury bonds that earn an average rate of return on publicly traded government debt.

401(k) plans may not be tax-advantaged retirement savings tools

A 401(k) plan is a powerful retirement tool. It allows you to make pre-tax contributions to your savings account, which grow tax-deferred. However, knowing the 401(k) plan rules is essential before investing your money. You will also need to understand the costs of the 401(k) plan and any fees associated with the 401(k).

Most 401(k) plans have stringent withdrawal rules. For example, you may be required to take a 10% penalty if you withdraw money before age 59. The IRS has also changed the minimum age at which you can start RMDs (Required Minimum Distributions) from age 70 to 72.

401(k) plans also tend to have high fees. A recent Morningstar study found that the average fee charged by a 401(k) plan ranges from 0.5% to 2% of the total plan assets.

It would help if you didn’t rely on a corporate pension

If you are planning for retirement, you should rely on something other than a corporate pension for all your savings. It would help if you had your money set aside in a place where you could enjoy the flexibility of your savings and tax benefits.

You should also take steps to protect your retirement savings. Your pension plan should be reviewed regularly, and you should contact your plan administrator if your account information changes.

You should be able to cash out your pension in a lump sum if you decide to. The amount you receive in a lump sum depends on your age, work career length, and earnings. When you are younger, you may find investing in a lump sum more beneficial.

Downsize your lifestyle to meet your goals

Downsizing your lifestyle is an essential part of planning for your retirement. It can reduce your expenses and allow you to put more money toward your retirement. Downsizing has several benefits, such as a reduced mortgage payment, less maintenance and cleaning, and a chance to declutter.

Choosing to downsize your lifestyle can be a significant financial decision, so it’s essential to understand what you’re getting into before you commit. This will help you to stay on track with your plan. Whether you’re considering downsizing a house or moving to a retirement community, you can take steps to make the process easier.

Having a written plan for how you’ll help ensure you get the most out of your move. If you hire professionals to help with the process, you can avoid letting clutter relapse.