Our Team Debunks Three Common Retirement Planning Myths
When it comes to your retirement planning, you shouldn’t believe everything you hear. Here are a few common myths about retirement that could land you in trouble.
Myth 1: Before I Retire, I Have To Kiss Debt Goodbye.
Wouldn’t it be nice to retire completely debt free? Unfortunately, that may not be an attainable goal for everyone or a responsible goal to set.
Some people spend their entire working lives trying to eliminate debt and, as a result, ignore their savings. So, a retiree may be debt free, but have an empty savings account and no retirement income to live on. Some people are even tempted to make the potentially grievous error of borrowing from their 401(k) plan in an effort to eliminate debt.
The truth is that for most people, a reasonable, manageable and responsible amount of debt can be healthy. Classify your tax-deductible mortgage with a low-interest rate as “healthy” debt. Avoid “harmful” debt with high-interest rates that cost you more, like credit cards or irresponsible loans.
Instead of eliminating all debt, try to eliminate “harmful” debt without neglecting your savings account. You don’t have to wait for your house to be paid off before you retire, but you should ensure that your retirement savings can cover the cost of the mortgage payments.
Myth 2: I Can Look Into Life Insurance After I Retire.
Are you putting off making a decision about life insurance? Often, when you retire, it may be too late or too expensive to secure a policy, due to age or pre-existing health conditions. It’s easy to view life insurance as simply another expense or added nuisance, but when it comes to retirement planning you shouldn’t put it off.
Before you retire, have a provision plan for your family in order. There are two large monetary demands your family may face after you’re gone: loss of your earnings and any medical or other debts you may leave behind. A life insurance policy could cover the loss of your income as well as your debts. You don’t want your family to have to deal with your debts after you’re gone.
Another benefit of a life insurance policy is that it offers funds to family members more easily than trying to access a deceased relative’s assets. A generous policy gives your family access to money to cover medical bills, funeral costs or existing debts.
Myth 3: I Should Start Drawing Social Security As Soon As I’m Eligible.
Although collecting Social Security the day you’re eligible may seem enticing, there are benefits to delaying benefits until a later age. Many people mistakenly think that they should be taking Social Security as soon as they can to receive the full benefit or in fear that it may run out. But, you may not realize the implications of taking it too soon.
The longer you hold off taking Social Security, the more money you’ll collect. Each year you wait, you’ll receive an 8 percent increase on the amount you’re drawing. The full retirement age now is between 65 and 67, depending on the year you were born. Whether you plan to work past 65 or you have enough retirement savings to support yourself without Social Security, try to postpone drawing it until 70, the latest year you can begin collecting it.
These are just a few of the myths that people commonly buy into, but with responsible financial planning, you can avoid these threats to your retirement plans.
Would you like to be financially secure and prepare for a comfortable retirement? Connect with a Richard Brothers financial professional located in South Portland, ME today to discover how you can secure your future with wise financial moves.
