I'm not sure if Social Security will be around in another 25 years when I retire. But I know that I'll retire more comfortably than my parents and other seniors from their generation.
That's because I've been learning a lot about retirement planning mistakes by observing the older generation. And, I have many more years to save and plan.
According to a recent article by Money Talk News, a lot of people have misconceptions about Social Security. I've already seen some of the damage done to older friends and relatives who operated under some false ideas. I thought about some of the Social Security myths that I've heard from older people.
Collecting as soon as possible
Some seniors say they want to collect their Social Security as soon as possible because the system is going bankrupt. They retire at 62 so they get their fair share before the Social Security funds run dry. According to the article, most reports show Social Security will have major problems by 2033. Most likely benefits would be reduced by 22 percent, but no one knows for sure how Congress may intervene.
My takeaway isn't to retire early, but to continue working and keep my job skills updated so I can work until my full retirement.
Living on Social Security only
I've heard some senior citizens tell them they will be poor but happy living on Social Security alone. Experts say it's completely unrealistic to think an individual or couple can live comfortably on Social Security without a pension or retirement income. I personally would not be able to live on about $1,200 a month, which is the average amount a retired worker makes with Social Security.
My takeaway is that I need to continue saving as much as possible, maxing out my Roth IRA account and getting my full company match to my 401(k).
Depending on Medicare benefits
Another common myth that led one friend to retire early was that she would be eligible for Medicare as soon as she turned 62. Turns out, you can collect Social Security early, but you don't receive Medicare benefits until age 65. Between the age of 62 and 65, my friend had numerous health problems that led her close to the brink of bankruptcy.
My takeaway is that I need to keep a job with medical benefits for as long as possible and wait until my full retirement age to retire.
Taking out a final mortgage
One couple I know decided to purchase their retirement home with a mortgage just a month before reaching age 62. They were under the false illusion that Social Security would easily cover their mortgage payment during retirement, but figured the mortgage lenders weren't as smart. They still have full-time jobs when they signed the closing papers on their retirement home. After retiring early in a down economy, they struggle to make their mortgage payment that is higher than their previous housing costs.
My takeaway is that I need to be happy with the house I already own and pay it off early.
The only thing I do believe is true when it comes to having a better retirement than the previous generation, is that a comfortable retirement will cost plenty.
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- Retirement Issues
- Politics & Government
- Social Security