Top 5 Retirement Myths, Ep #1

There are a lot of myths being perpetuated about retirement that are simply NOT true. These myths may leave the average personed discouraged and disheartened about their future and wondering if they’ll ever retire. How much money do you need? How much will you spend? Will social security still be around? Will taxes be lower? In this debut episode of Retirement Made Easy, I dispel some of the myths around retirement to help you breathe easier—and prepare for your future.  

You will want to hear this episode if you are interested in…

• [1:01] Myth #1: You will spend 70–80% of your pre-retirement income
• [5:04] Myth #2: Your taxes will be lower in retirement
• [11:36] Myth #3: You should take social security at age 62
• [15:33] Myth #4: you need $1 million saved for retirement to retire
• [19:07] Myth #5: Retirement is the end

Myth #1: You will spend 70–80% of your pre-retirement income in retirement

The current ‘rule of thumb’ is if you make $100,000 a year during your career, you’ll only spend $70,000-$80,000 a year when you retire. I cannot tell you how many clients I’ve had who’ve been retired for years who spend just as much—if not more. Some spend half as much. The truth is, averages can’t apply to everyone. Retirement planning needs to be 100% personalized to your goals. So how should you plan for what you need? What are your dreams for retirement? How do you quantify them? Listen to hear my thoughts!

Myth #2: Your taxes will be lower in retirement

The truth is, we don’t know what the tax codes are going to be in the future. In all likelihood, the tax environment will change multiple times in your lifetime. It would be a lot easier to plan if we knew what they’d be—but you have to wait and see. Many people believe taxes will be higher because the federal deficit is at monumental levels. 

On the other hand, your state income taxes could be lower for you in retirement. Why? Only 13 states tax social security benefits and only above a certain income threshold. Illinois, Texas, and Florida are all great states to retire in because they don’t charge state tax. But how much you’re taxed in retirement depends on where you live, what kind of retirement accounts you have (Traditional IRA versus Roth), and the tax bracket you fall under. I explain this in detail—so keep listening. 

Myth #3: You should take social security at age 62 before the “pot runs dry” 

Many people are concerned about the solvency of social security. Did you know that 34% of retirees claim their benefit right away at age 62 and 57% claim benefits before their full retirement age? There are 77 million baby boomers. They’re counting on that retirement benefit—it WILL be there for people. So don’t base your decisions on the retirement myth that it will stop existing. But when should you claim benefits? That depends on a few factors, such as whether or not you’re still employed, your marital status, your health, current finances, and your retirement goals. 

Myth #4: you need $1 million saved for retirement to retire

Many people see ‘$1 million’ and immediately think “I’ll never retire.” The truth is, many people may not need $1 million to live on in retirement. If someone has a high corporate pension that’s disbursed monthly it may support their lifestyle. Someone who retires completely debt-free can live on less. Or perhaps you had a long career and you’ll be receiving over $2,000 a month in social security benefits. Even where you live—such as the midwest or west coast—impacts what monetary amount you need to save. The bottom line? What you need for retirement is based on what you want out of your retirement. 

Myth #5: Retirement is the end

This couldn’t be further from the truth. Retirement doesn’t mean you shift to a life without meaning. Retirees still work part-time, start small businesses, volunteer, and live out the best years of their life. The latest generation of retirees is the most active that we’ve ever seen. They key is to figure out what you’re passionate about. If you could do anything, what would it be? What would bring you the biggest joy? Can you turn a hobby into a small business? Retirement marks a new beginning—not an end. 

Resources & People Mentioned

• Social Security Administration