7 Retirement Myths
Busting the top 7 retirement myths
Retirement is an emotional journey as well as a financial one. You may need to be prepared for the fact it’s not going to be exactly as you thought it would.
Here are seven of the most common retirement misconceptions.
1. I can delay saving for retirement until later when it is easier
The traditional savings plan used to involve first paying off your mortgage, then your children’s further education costs and only then starting to save for your retirement.
But with growing life expectancies come longer retirements and, with that, the need to start saving earlier in life for this last phase.
It’s best to start a savings pot for all eventualities all at once, rather than waiting to tick off each milestone and then start building up the reserves again.
2. Medical insurance will cover all health eventualities
Medical insurance is amazing but it does not cover everything.
While it may cover your hospital stay and most medical treatment you require, it will not account for what happens to you after you leave hospital.
Ongoing day-to-day costs such as paying your mortgage if you can’t work as a result of an illness or any adaptations that may be required to your home can only be dealt with via Critical Illness Cover, something many people do not consider.
3. I’ll spend less (and pay less tax)
You may end up spending more in retirement than you think.
For instance, the cost of travel is skyrocketing and, by the time you retire, your family could have expanded to include grandchildren and you might all be spread further afield than you are now.
Additionally, inflation can erode your purchasing power over time. Another related misconception is that you'll pay less in taxes once you're retired, however this assumes you'll have less income. If you end up with the same amount of income in retirement as you had when you were working, you may not be in a lower tax bracket.
4. Saving 10%-15% is enough
Saving 10-15% of your income for retirement may work if you started saving in your 20s.
However, if you’ve waited until later in life, then you will need to take those lost early years into account if you are to live a comfortable retirement.
It might mean that you should be saving in excess of 20% of your income and, in addition, you might need to supplement this with other investments and asset acquisitions.
Earlier really is better when it comes to saving.
5. Retirement means your life is no longer useful
Without the daily grind, many retirees can feel rudderless, that their life is lacking in purpose.
But, with a bit of planning, this is far from true.
Retirement provides you with one precious commodity – time. Time allows you to focus on enjoyment, personal achievements and, in some cases, a successful second career.
Hopefully, by the time you come to retire, you’ve learned from personal and professional mistakes and failures and are better equipped to grab life by the horns.
6. Money is the most important thing
As we’ve already said, money is hugely important when it comes to retirement.
But, as the saying goes, money doesn’t buy happiness. While it provides you with freedom, true happiness in retirement is a balance that also requires good health, emotional and intellectual wellbeing and a reliable support system in the form of family and friends.
And, if you haven’t managed to save a huge nest egg, as long as you have those other things you’ll be okay.
7. Financial planning stops when you retire
The need for financial planning does not stop at retirement, rather it should be a life-long commitment.
None of us know how long our retirement will be but we do know that general worldwide trends show people are living longer.
Estate and succession planning, as well as awareness of the need for long-term investment, should be front of mind throughout your retirement.
This all needs careful management and so the services of a good financial adviser will be key.