20 lies we tell ourselves about retirement

We don’t know what adventures we’re in for once we reach retirement age, but you can bet that it probably won’t go exactly as you plan. As you prepare for retirement, you’re going to have to protect yourself from potential health problems, unexpected expenses and other financial hardships. Here are some lies we tell ourselves about retirement.



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I’ll be able to retire when I reach retirement age

It’s increasingly common that individuals work past the date at which they become eligible for government assistance, even as the official retirement age keeps increasing in countries like the United States and Canada. According to a report from United Income, the number of retirement-age Americans in the labour force has doubled since 1985.



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I will be able to work until retirement age

According to the Center for Retirement Research, 37% of retirees stopped working before they planned. The decision to stop working is often involuntary, and it can be precipitated by poor health or late-in-career layoffs. Taking an involuntary early retirement can have a serious impact on your savings and your retirement planning.



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I won’t have to work at all once I end my career

Retirement today isn’t the same as it used to be. Full pensions are no longer common and you can expect to live longer than ever. It may be necessary, even after you’ve retired, to pick up some part-time or temporary work to help pay the bills and to make sure you’ll be financially healthy as you get older.



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I won’t need to save money until later in life

Investments grow over time, which is why it’s important to start saving early. Even if you can’t put that much toward your retirement investments at first, it will compound over time. According to Vanguard, a dollar you invest at 20 could be worth almost four times a dollar invested at 55 when you reach retirement age.



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I can’t afford to save money

Even if you don’t have much money to save right now, it’s also important to get into the habit of saving. Even if you can only put aside a small portion of your paycheque, or even a few dollars a day, it creates a habit that you can continue when you start earning more money.



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I don’t need to invest

If you have a healthy amount of money in your savings account, it means that you’ve done a good job of budgeting, and you have a healthy sense of financial responsibility. Unfortunately, inflation is going to eat away at those savings the longer they sit there, which is why it’s important to invest your retirement savings, according to Investopedia.



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Marriage will help me save more money for retirement

If you’re planning on waiting until marriage to begin saving for retirement, you might need to rethink your plan. Sure, the combination of two incomes will help with some costs, but those savings will quickly get eaten up if, for example, you decide to have children, or something happens that prevents your spouse from earning an income.



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I’ll get by on my inheritance

Are you expecting a large inheritance before you retire? Well, your parents might not see it that way. As baby boomers pay out for expensive end-of-life care (or even for expensive and comfortable retirement lifestyles), Gen Xers and millennials may be surprised at how little is coming their way, according to MassMutual.



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Once I downsize, I’ll be able to live off the equity of my home

In 2008, the real estate market crashed and millions of people lost all of the equity in their home. A good retirement portfolio, in contrast, requires diversification to hedge against the risks of a market downturn. Owning a home is good, but it’s not enough to ensure your financial security in retirement.



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I will be able to work when I’m older

You may believe that you’ll be able to work past retirement age, especially if you’re healthy and you love your job. However, a Gallup poll found that the average retirement age in the United States is 61—which is lower than one might expect—because of unplanned retirements due to poor health or layoffs.



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My kids will take care of me

For generations, parents could rely on their children to take care of them in old age, but this dynamic is changing as younger generations can no longer expect to have the same financial security as their parents. According to a report from the Federal Reserve, millennials have a net worth 40% less than Gen Xers in 2001.



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My company’s retirement plan will be sufficient for retirement

While you should always take advantage of an employer-provided retirement savings plan, don’t expect it to be enough for your retirement. Financial guru Dave Ramsey warns that some employer-sponsored plans, for example, can only be put toward a limited amount of mutual funds, which could limit its potential returns.



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I’ll have enough money to retire early

If you’re planning to retire early, you’ll need enough money to last into old age, despite the fact that your government assistance may be lower in some countries (like the United States) and you won’t have as much time for your investments to increase in value. As more people work past retirement age to make ends meet, most economic indicators are trending in the opposite direction.



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I will sell my business for retirement money

If you’ve risked your financial savings to become an entrepreneur and, against all odds, managed to succeed, it may be tempting to view your small business as a nest egg, but you don’t know what the market holds for a business like yours. Putting faith in one business is roughly equivalent to investing all your money in one stock—it’s a big risk.



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Investing is too risky

Risk-averse individuals may see investments as a chance not worth taking. Unfortunately, however, a savings account will lose value over time compared to inflation, according to Investopedia. Investments in low-risk products like bonds, mutual funds or indexed funds can help earn money without putting your money in jeopardy.



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I won’t need to worry about healthcare costs in old age

Most developed countries offer government-sponsored healthcare to their citizens, and even in the United States, seniors are eligible for government-provided Medicare coverage, but don’t expect government programs to pick up all of your late-in-life healthcare needs. Fidelity estimates that the average couple will require $285,000 for healthcare in retirement.



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My credit score isn’t important

Once you’ve paid off your mortgage, you may make the mistake of believing that your credit score isn’t all that important, but you’ll still need good credit if you plan to rent a new house or apartment, purchase a new car, co-sign a loan for a child or grandchild, or even take out a loan to cover an emergency.



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I can start saving for retirement once I’m out of debt

As any financial adviser can tell you, there is such a thing as “good” debt, like a low-interest student loan, and “bad” debt, like a high-interest credit card. While it makes sense to eliminate “bad” debts before they snowball out of control, you may get better value out of investments than paying off good debt as quickly as you can.



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I won’t need long-term care

Even if you are in good health and expect to remain that way for some time, don’t make the mistake of assuming you’ll never need long-term care. Seniors have a 70% chance of needing long-term care, according to the American government, and 20% of them may need it for longer than five years.



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I’ll never be able to retire, anyway

While some people believe that they’ll never be able to retire, they make a mistake in assuming that they’ll have a choice in the matter. According to a study from ProPublica, 56% of people who leave their jobs after turning 50 did so involuntarily, either for health reasons, age discrimination or layoffs, suggesting that retirement is not always a choice.



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