Get the most out of your golden years with these four tips for retirement planning.
Many people dream about the day they can retire. Visions of traveling or spending free time on beloved hobbies can fill one’s mind, but retirement involves many aspects some people never consider. One of the main areas of retirement that needs careful deliberation is financial in nature. Today, people are living longer than ever before. In fact, recent Social Security data estimates the average life span for men at 84.3 years, and 86.6 years for women. Averages for younger generations are pushing into the mid and late nineties. What does this mean for soon to be retirees? That there will be a greater financial need to properly care for oneself as retirement years are extending. The best way to prepare a solid retirement plan is to understand the top myths about retirement. Here are 4 you should be aware of:
Retirement Planning Myths
Myth 1 – Social Security will be enough to survive on. Unfortunately, this is not true. According to Social Security Administration data from 2015, the average monthly pay out was $1,342. That would mean you would need to survive on just over $16,000 per year. Plus, with out-of-pocket medical costs (not covered by Medicare) during retirement averaging over $200,000 per couple, you would fall severely short when it comes to being financially stable.
Myth 2 – Medicare will cover my medical expenses. While Medicare, a federal program that covers certain healthcare costs for those who turn 65, does cover some medical expenses, it certainly doesn’t cover all. Let’s take a closer look:
What Medicare covers - routine medical exams, illness or injury related hospital costs, treatments, surgery and some short-term rehabilitation.
What Medicare doesn’t cover– Long-term care, most dental care, eye exams, dentures, cosmetic surgery, hearing aids, hearing aid exams, and routine foot care (crucial for diabetics). Think long-term care isn’t important to consider when planning for retirement? Think again. The U.S. Department of Health and Human Services estimates up to 70 percent of people who live to the age of 65 needing long-term care eventually. The majority of that care is not covered by Medicare or health insurance. (Ask your financial advisor about securing long-term care coverage).
(Credit: Official Marines Website)
Myth 3 – You should retire at age 65. This is one of the top myths about retirement that many people believe. Years ago, age 65 was considered full retirement age. It was at this point that everyone reaching that age would file for Social Security benefits and begin their retirement journey. Today, full retirement age according to the Social Security Administration has changed. For people born between 1943 and 1954, full retirement age is 66. Anyone born between 1955 to 1959, full retirement age would be 66 plus two months per year. And, for those born after 1959, 67 become the official “full retirement age.”
Why is this so important? Well, anyone filing for retirement at age 65, whose full retirement age is actually later, will permanently receive reduced Social Security benefits or the remainder of his or her retirement. This reduced benefit can put a serious strain on paying for living and medical expenses, let alone any extras.
Myth 4 – It’s too late to save for my retirement. This is never the case. While the ideal age to start saving is in your 20s or 30s, men and women who start saving in their 40s, 50s and beyond can still create a nest egg. With investments, 401(k), an IRA, and paying down debt, you and your financial advisor can still create a retirement plan that can meet your needs. Plus, some investment vehicles such as IRA and 401(k) let people over age 50 play catch up with larger contributions!
Want to learn more tips for retirement planning? Let Matt Logan share more myths about retirement with you and help you create a solid retirement plan for your future.
Matt Logan Inc is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRA, SIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice.