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Common Retirement Misconceptions

Many people look forward to early retirement, imagining limitless days of leisure and relaxation. However, there are a lot of false beliefs that can cause mental and financial stress on the road to retirement. In this blog post, we explore the myths that are frequently held about retirement and clarify the facts that should be known by everyone considering retirement.  This will consider those taking a traditional approach to retirement, and those who view it in the lens of financial independence.  We examine the realities of retirement, assisting you in making the necessary emotional and financial adjustments as well as navigating this momentous life shift with clarity and confidence.

Below are 7 Common Early Retirement Misconceptions I frequently see:

  1. There’s a set predetermined retirement age for everyone

You are always free to choose when you retire.  What you want that to look like and how much you have saved are the most important considerations in that order.  This misconception is usually based on one’s social security age or due to medicare starting at age 65, but in reality these factors do not fully determine how and when you retire.  I’ve even heard individuals claim their retirement age is pushed back due to social security full retirement age changing, which is not true for all.

Your total savings and how much of your expenses need to be covered by retirement funds is far more important than social security full retirement age and Medicare. 

  1. I can never have enough money for retirement

When you are in saving mode it can be tough to flip the switch to spending mode.  This causes people to continue to hoard an unnecessarily high amount of savings for retirement, which they may not need, purely for the feeling of security.  Oversaving can potentially lead to regret as one may feel later on in life that they could’ve used some of their savings early on for experiences that bring them joy.  Getting a full understanding and acceptance of your spending habits and monthly spending amount will help alleviate this, alongside working with a planner specialized to help visually show you how your savings can offset expenses.

  1. I won’t earn another dime in retirement

Many retirees continue to earn income in retirement even if they don’t need to. Sometimes it’s a hobby that they come to monetize and sometimes they may get a part time job for the socialization aspect, and if they are personally tied to their careers and enjoy their line of work, they may continue working out of enjoyment altogether.  Nothing wrong with any of these approaches as you have the freedom to choose how you spend your time.

  1. I can do my own retirement planning with any simple calculator

Retirement planning is complex.  Most calculators don’t account for all variables and it can be easy to miss technical planning items, and it doesn’t cover the mindset shift needed for retirement.  

  1. I shouldn’t own any stocks once I retire

Most certainly this is not true.  In fact, many retirees I work with hold a majority of their non cash investments in stocks over their bond holdings.  Many factors determine your asset mix, with one of the primary factors being how quickly and how much of your stock you plan to withdraw from your portfolio.  After all, you likely won’t withdraw your entire 401k upon retirement so some of the investments will be short term and some will be long term.  

Any part time earning, social security, pensions, and your expenses will be a bigger determinant in this.  The decision to go to cash in retirement is usually made out of fear, and a difficulty adjusting from earning to spending down your savings.  Truthfully, I more often see inflation or lack of catastrophic risk mitigation as a bigger threat compared to a market downturn.  Recognize what part of your portfolio is long term vs short term and do not open your mind to market noise that can impact your decision making.

  1. I can’t retire early because of healthcare costs

Most individuals have not really looked at the cost of healthcare in retirement, and may only be looking at their current plan vs Affordable Care Act, health savings cooperatives, and other solutions.  This belief is derived sometimes because of what we hear generally about health insurance or perhaps only from looking just at the private health insurance market.  Seek out additional solutions, and compare the cost to what you can spend in retirement.

Medicare is available upon getting to age 65, but depending on your income and savings, retiring earlier is very feasible for most.  Budgeting out the actual cost of care with your existing budget would be the first place to start here.

  1. My FIRE number is the most important factor

A common theme within many of these misconceptions is the psychological factors when thinking about retirement and financial independence as a whole.  Undoubtedly, this is actually the starting point as your lifestyle, goals, and hobbies will dictate how much you want to save, how you want to work, whether you continue working because you enjoy it, etc.  

The math and the gears are the secondary piece, as it is impossible for a single number or percentage to determine such a large life decision.  Your life will undoubtedly change as you transition to financial independence so flexibility is a big component here.


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