What’s the Reality of Retirement Living? (6 Myths Dispelled)
There’s no one-size-fits-all retirement plan, so it’s almost impossible to know what your retirement will look like before it happens. And there are many retirement myths with the potential to ruin your golden years. While many relate to financial planning both before and during retirement, others are based on retirement living.
Here, we dispel some of the most common retirement myths with facts.
6 Myths (and the Realities) of Retirement
If it’s imminent or years away, planning for your retirement may be intimidating given the myths that pop up online or are fed by investment advisers and sociologists. Below, we bust some of the most common retirement planning myths with the facts.
- Setting Aside 10% of Your Current Pay Is Enough
This is a simple, convenient figure that only applies if you started young. If you’re nearing retirement age and only not begun to save, 10% will likely not be enough. Instead, put aside whatever you can manage. Remember, you may spend as many years retired as you did working, meaning you need more to fund your golden years. A bigger nest egg requires a more proactive approach to retirement savings while you’re still working. The sooner you start, the easier it’ll be to reach your goal.
- Your Expenses Will Reduce after Retirement
This may be the reality for some but not all. When planning our retirement, most of us want to maintain our current standard of living. While retirees receive some tax exemptions and save money on things like transit, other expenses, like healthcare, can go up.
To accurately estimate your post-retirement spending, consider your current expenses and lifestyle – are they going to change? For example, are you planning to lead a laid-back life or do you want to spend more on leisure activities, travel and entertainment? Your savings strategy should depend on your priorities.
- If You Haven’t Saved Enough, Get a Part-Time Job in Retirement
Although you may continue working into retirement, a deterioration in your health (or your spouse’s) may hinder your ability to keep working. Even if you’re healthy and employed, there’s always the possibility of layoffs or downsizing. Senior employees often receive a hefty wage, and if your company experiences financial difficulty, your job may be at stake because of how much it costs to keep you on. What’s more, finding a new, part-time job in retirement can prove challenging, and changing your career is not an option for all retirees.
- Your Inheritance Will Take Care Of Your Retirement
Some people use their inheritance as an excuse not to save for their retirement. This could be a big mistake. Your benefactor (usually parents) may outlive their money or spend it on their own health and nursing care. Investment scams, stock market crashes and family drama can also leave you without an inheritance. The better strategy is to be independent and start saving early for your retirement by putting away a little every month.
- Your Company Will Take Care Of Your Healthcare in Retirement
Retiree health benefits are diminishing. Almost half of Canadian employers don’t offer any non-pension retiree benefits like health care and dental (according to a May 2017 report). And even if they do, they usually cover less than half. Companies are having a hard time coping with increasing health insurance premiums and are aggressively reducing retiree health coverage. Depending on when you plan to retire and your employer’s retiree benefit policies, you’ll probably be in charge of your own health insurance. That means you’ll need to consider supplemental medical insurance as potential healthcare costs in retirement.
- Retirement Planning Is All About Money
While saving money is an important part of your retirement planning (and most information about retirement focuses on it), it’s not the only objective. Retirement creates lifestyle choices that differ from one person to another, and money is just a means to support that lifestyle.
But, unless you’re facing acute poverty, your happiness in retirement will result more from your relationships than how much money you’ve saved. So, when planning your retirement, make sure you spend as much time strengthening familial bonds as you do your financial savings.
Dreams of leisurely strolls on the beach or golfing may sound appealing, but if your retirement planning isn’t on track, chances are you won’t be able to afford them. Heeding the myths and approaching your retirement in the right way can go a long way towards a happy, fulfilling life after work.