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When most people think of retirement they think of spending more time with family and friends, traveling, and taking up a hobby, not preparing a resume and working at a job to make ends meet. But if you are not careful then your retirement may only be a temporary hiatus from the workforce until your nest egg runs out.
As you approach retirement you may think you have it all figured out – think again. People spend years planning for retirement and some set a date on their calendar on which they plan to say goodbye to work forever. But for most retirees, a fair number of these plans and expectations will run into an unexpected reality. Here are five myths that could cost retirees everything.
1. Pay Attention to Timing – One of the biggest myths for retirees is that they will actually stop working when they are ready to retire. Many financial plans rely on a saver working well past age 65 to avoid running out of money during retirement. However, approximately 70% of retirees actually stop working before they turn 65. The most common reason for this is health problems.
2. Now what do I do? – Most people think they’ll just sit back and relax when they retire. But oftentimes this gets boring for retirees and they find themselves in need of something to do. Retirees should think outside the box when it comes to how they stay engaged. Keeping active can help keep you mentally and physically alert long in to your retirement years.
3. Searching for Income – Most investing strategies during retirement use to revolve around investing for income, with a focus on bonds or dividend stocks. But unfortunately now thanks to Federal Reserve policy and a weak economy, the sources of investment income do not exist like they used to.
4. Life is Expensive – Many retirement plans count on living expenses dropping by 20%, but in most cases this is just not true. Many retirees spend as much, if not more, in retirement. One of the main reasons is that retirees have a lot of free time and therefore more time to spend money. Another reason is that retirees often fail to budget for spending money on their “bucket list” of travel or other leisure activities.
5. Coverage Gap – Oftentimes, retirees incorrectly assume that Medicare will protect them from all big medical bills, but Medicare is not designed to cover everything. One common medical expense that reduce your savings is dental work, and Medicare does not cover it. Still, the biggest bills can come from a nursing home, which also not covered by Medicare. Planning for retirement is much more than just creating investment portfolios and dreams. It takes a lot of careful consideration of what life can throw at you and taking the unthinkable into account. Long term care planning is essential with an experienced elder law attorney.
For more information on Medicare and Medicaid, click here to download a free planning guide.