There are several myths associated with retirement. They range from the idea that Social Security benefits will run out before most generations can retire to the notion that you'll never be able to save enough to comfortably retire.
GOBankingRates spoke to several financial experts about the biggest retirement myths out there and the realities behind the myths. Read on for their insights.
You Don't Need To Max Out Your Retirement Accounts Every Year
If you can afford to do so, you should contribute the maximum amount to your employer-sponsored retirement plan and any retirement savings accounts you have outside of the workplace. Doing so will increase the chances that you'll reach your investment goals.
"The earlier you start, the better," said Tyler Abney, CFP, AIF and founder and CEO of Tidemark Financial Partners. "Maxing out these accounts will allow your investments, and any potential earnings to grow on a tax-deferred basis."
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All You Have To Do Is Save as Much as You Can
The problem with this myth is that while you can and should certainly save for retirement, you need a solid savings and investment plan, too.
If you don't have a plan, it will be difficult to understand whether your savings will provide you with the lifestyle to which you've grown accustomed and for each year of your retirement. Abney recommends establishing clear goals that incorporate a time element (such as the number of years until retirement) to create a relevant investment plan.
It's Acceptable To Have Less Money When You Retire
While some may believe your expenses will be less when you retire, that is not always true --especially when you factor in the changing economic climate and the potential for increased healthcare costs when you are older.
"This myth only holds true if your idea of retirement means sitting at home and reading a book or watching television," said Tom Wheelwright, CPA. "It's especially damaging because this myth results in a highly-regulated, highly taxed retirement income that stifles your wealth. There are ways to invest your money that provide strong returns while reducing your tax burden, helping retirees keep more money in their own pockets and retire handsomely."
401(k)s Are the Be-All, End-All of Retirement Planning
This is another common retirement myth Wheelwright sees, where many retirees may not focus on diversifying their retirement portfolio efforts and invest solely in their 401(k).
"Most people I've spoken with want to retire rich, but their CPAs, CFPs and other financial professionals don't structure their investments in a way that maximizes the money in their pocket and reduces their tax burden. The reality is life doesn't end when you stop working. Your retirement plan should allow you to experience the best of life, because the best is yet to come," said Wheelwright.
Your Employer Stock Options Are Enough
"Some investors make the mistake of investing in just one fund or asset type, thereby subjecting it to high risk should the market impact their specific holding. Spreading your investment risk over a mix of assets can help manage potential loss during these sharp market swings. The key here is diversification to offset losses in a particular asset category," said Abney.
Social Security Will Fully Support Retirees
The reality about retiring with Social Security is that it will not be possible to live on Social Security alone. This is because Social Security is not designed to act as the sole source of income for individuals entering retirement.
Some of the best approaches to boosting Social Security payouts include contributing to retirement savings, maxing out contributions and diversifying retirement income buckets. Depending on your situation, it may also be a good idea to look into delaying retirement until age 70 and continue working. Retirees who choose to delay retirement will receive the maximum payment available and coverage under health insurance.
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