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rainymike

7 common myths that can ruin your retirement

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rainymike

Here's where I stand.

 

1. Correct. Had no plan to work until I died. Retired in my late 50's.

2. Correct. Downsizing has been elusive. When I rented, I was ahead of the game. Now that I'm in the process of buying a home in the Phils, the price is much higher than I had anticipated.

3. Wrong. Have medical insurance for life as part of my retirement plan. Theoretically I can get reimbursed from using healthcare in the Phils.

4. Wrong. SS has been a help to supplement my primary pension. SS for my daughter is part of the safety net in case I croak before finishing this sentence.

5. Hopefully Correct. Next year I hit 65, and I guess that increases the likelihood I'll reach my 80's (20 more years!).

6. CORRECT. Didn't quite anticipate starting a family at my age. Won't be another 15 years or so before I feel comfortable cutting them off.

7. Wrong. I don't underestimate inflation. Have worked hard to wipe out all debt and build up savings.

 

 

 

Most Americans have long ago come to the conclusion that retirement isn’t going to be all travel and tennis. With fewer savings and smaller (if any) pensions, there’s an understanding that most retirements now involve some sort of work and a close eye on budgeting.

Planners say that even with that understanding, those 50+ consumers known in the industry as “pre-retirees” still make a number of assumptions about their own retirements that are unrealistic. Confronting those assumptions, and adjusting them now, will ensure you’re more satisfied once you hit those golden years.

Here are 7 ways that Americans are unrealistic about their retirement plans.

1. You won’t really work till you die. Since it’s so hard to save enough for retirement, a growing number of pre-retirees plan to just keep on working.  More than quarter of workers now say they are going to work past age 70, and 10 percent say they’ll never retire, according to a recent study by the Employee Benefits Research Institute.  But planners say that unexpected events, such as a change in your or your spouse’s health or a company layoff often derail such plans. The median age for retirement in America is still 62, which—despite worker plans--hasn’t changed in more than 20 years.

2. Downsizing is easier said than done. Lots of pre-retirees plan on trading in the family home for a condo or apartment and living off of the additional equity. That’ a great plan, but in many cases, the savings don’t pan out. Retirees tend to sell their older homes for newer apartments with more modern amenities—such units tend to cost more, which eats away at the potential savings.

Related: The Worst States For Retirement in 2015

 

More than half of pre-retirees don’t end up downsizing with their final move, according to a recent report by Merrill Lynch, and 3 in 10 actually buy a larger home. If you really want to cut down on your living costs, consider moving to a cheaper location, where you can get a bigger or newer home for a lower price. 

3. You haven’t saved enough for healthcare. Average out-of-pocket recurring medical expenses for retirees are around $1,855 per year, not including hospital stays or nursing home care, according to EBRI. Factoring in inflation, and that non-recurring expenses tend to increase with age, that amounts to some $40,000 per year for a 30-year retirement. 

A typical couple would need nearly $250,000 on hand to have a 90 percent chance of covering all their medical expenses in retirement. If you don’t have that kind of cash set aside, be prepared to cut back on other lifestyle expenses in order to cover those growing bills. Answer a few questions on this health care cost calculator from AARP to get a sense of what your healthcare expenses may look like, and start contributing to an HSA now.

4. Social Security isn’t going to be much help. More than a third of Americans who haven’t reached retirement age think that Social Security will be a major source of income in their post-work years despite the government program’s ongoing funding problems, according to a recent Gallup poll. Currently Social Security provides an average benefit of about $1,260 per month, which is already not enough for most people to live on. If funding problems persist, those checks could shrink or kick in at a later age. “For most people, relying on Social Security just isn’t going to get it done,” says certified financial planner David Jackson. 

The longer you wait to claim benefits, the higher your payment will be. Continuing to delay collecting Social Security after your full retirement age will net you 8 percent more a year.

5. You’re going to live longer than you expect. If you’re not planning for at least a 30-year retirement, you may run out of money. Men who make it to age 65 have an average life expectancy of 86.6 years, and 65-year-old women will live until an average of 88.8 years, according to the Society of Actuaries. That means that there’s a reasonable chance you’ll live longer than that, especially if you’re in good health and have a family history of longevity. “What happens when you live to be 105 but run out of money at 97,” asks Katie Libbe, Allianz Life vice president of consumer insights.

Related: 5 Things No One Ever Tells You about Retirement

6. It’s really hard to cut off your kids. Whether they’re victims of a tough economy or they’re just old-fashioned mooches, it’s increasingly common for adults to rely on financial assistance from their parents well into their 20s and 30s. Part of the problem, planners say, is that Boomers just can’t say “no,” even when it puts their own retirement security at risk. “Sometimes parents forget that they need to put themselves first,” says Kathleen Hastings, a certified financial planner with FBB Capital Partners in Hastings, Md.

Baby boomers with financially independent adult children are more than twice as likely to be retired than peers who are still footing their kids’ bills, according to financial research firm Hearts & Wallets.

7. You’re underestimating inflation. Even if you’re accurately underestimating your costs in retirement, it’s difficult for many pre-retirees to accurately gauge the impact inflation will have on those expenses. At an average 3 percent rate, your costs will double every 10 years. Failing to factor that into your savings can have a disastrous impact on your ability to maintain your lifestyle. “You don’t notice inflation year-over-year, but it will build up over a 20-year retirement,” says James Nichols, head of retirement income and advice strategy for retirement solutions at Voya Financial.

 

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Jack_be_nimble

I don't place any value on articles like this because the writers just assume you're living in the USA and NEED all the creature comforts available, and/or need common vices; sad diet, smoking, etc.

 

 

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arentol

Great observations, Mike, thanks for taking the time.

 

Agree with Jack as well -- American media writers always write for U.S. audiences and assume that every reader is an American residing in America. The fact that their advice doesn't apply to all Americans doesn't seem to occur to them.

 

 

Cheers,

Aren

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lamoe

Here's where I stand.

 

1. Correct. Had no plan to work until I died. Retired in my late 50's.

2. Correct. Downsizing has been elusive. When I rented, I was ahead of the game. Now that I'm in the process of buying a home in the Phils, the price is much higher than I had anticipated.

3. Wrong. Have medical insurance for life as part of my retirement plan. Theoretically I can get reimbursed from using healthcare in the Phils.

4. Wrong. SS has been a help to supplement my primary pension. SS for my daughter is part of the safety net in case I croak before finishing this sentence.

5. Hopefully Correct. Next year I hit 65, and I guess that increases the likelihood I'll reach my 80's (20 more years!).

6. CORRECT. Didn't quite anticipate starting a family at my age. Won't be another 15 years or so before I feel comfortable cutting them off.

7. Wrong. I don't underestimate inflation. Have worked hard to wipe out all debt and build up savings.

 

1. I did  - but retirement was forced on me - working was a pleasure

2. Downsizing will be easy - never wanted a 700 SM house

3. Same also have VA: “my doc has indicated that once I''m there can still use US address for meds for awhile and he will over prescribe also  Viagra if I want.

4. Same only half of sustainable monthly budget maybe 1/5  - depends on rich 90 year old only relative  aunt (permanent 2 week millionaire?)

5, No problemo  - I earned it  - I spend it - will pay off daughter's debts then NO MORE with a clear conscious  - $50 K for grandson education

6. Snip - snip  left / right 36 years ago

7. Same except got nailed by house deflation of about $150 K ($75 after wife gets half)

 

They forget #8

 

8. At a certain age men (me 67) are vastly outnumbered by women (USA and even there  - of comparable and up to 20 years younger - 47) and if they are in the least still active in all ways -  can easily obtain a situation that would require very little to no monetary outlay of their own (housing , food, even monthly allowance - don't ask,  etc.) . Simple companionship should not be overlooked.

Edited by lamoe
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lopburi3
3. Wrong. Have medical insurance for life as part of my retirement plan. Theoretically I can get reimbursed from using healthcare in the Phils.

Make sure of that - most US insurance does not cover expats in my understanding as is now limited to specific providers except for emergency treatments - just double check before you depend on it.  Many in Philippines are ex military and have overseas coverage available through that so maybe not discussed often for other type of insurance.

 

If you need to obtain foreign insurance time is of the essence as known issues are often not covered and many have limitations on age of enrollment.  

Edited by lopburi3
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bahalina buong

Great observations, Mike, thanks for taking the time.

 

Agree with Jack as well -- American media writers always write for U.S. audiences and assume that every reader is an American residing in America. The fact that their advice doesn't apply to all Americans doesn't seem to occur to them.

 

 

Cheers,

Aren

Would you prefer just another generic, promotional fluff piece?  It was a detailed article targeting Americans, so if it doesn't apply to you, then don't read it.  I certainly won't whine when some Euro rag publishes retirement info that doesn't pertain to me.

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arentol
Would you prefer just another generic, promotional fluff piece?  It was a detailed article targeting Americans, so if it doesn't apply to you, then don't read it.  I certainly won't whine when some Euro rag publishes retirement info that doesn't pertain to me.

 

Thank you for your kind unsolicited negative comment. Have a lovely day!

 

 

Wishing you rainbows,

Aren

Edited by arentol

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smokey

another survey to tell me what i am suppose to like or live or eat... hummm i trust jerry springer more then these articles 

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NOSOCALPINOY
During my young adult life, I away read about the following statement below and it made me concern, if I will even have that much for retirement. 

When I took a  6 yr early retirement at age 49, I didn't even come close to having that amount in my Civil Service Retirement (CRS) plan, 20% VA Comp at retirement and then my Military Reserves pension at age 60 and SSA pension at 62. Yes, I'm one of those U.S. Government quadruple-dipper (earned entitlements), but I'm not the only one. 

I just closed my eyes and we took a leap of faith and moved to the Philippines with my meager small initial Civil Service pension, which came to 42% of my combined highest 3 yr average AGI, including 6 yrs of penalties at -$250 a month, which only came out to $1,700 a month net, but was still an adequate income to live on in the Philippines when the cost of living was still affordable back in 1998. 

So, that statement that "$1 million may no longer be enough to retire on" is sort of misleading, but it would only pertain to those who retired in the U.S.. 

We're just fortunate that everything worked it self out when I turned 60 and 62 even without having a million dollars to my name!.  

 


 

$1 million is no longer enough to retire on

There's nothing magical (or scientific) about $1 million as a goal for retirement savings. As a round benchmark, however, it's been in the ballpark for a couple hoping to retire comfortably. A $1 million principal will generate $60,000 per year in income if the portfolio's return is 6%, and $40,000 per year at 4%. The amount you need to live on, of course, depends on many factors, including the cost of living where you reside, healthcare expenses, how much you travel and how long you live.

But if rates remain in the low range they’re in now—with 10-year Treasury rates well below 3%, say—it will change the math of retirement planning. During most of the baby boomers' working lives, it was reasonable to expect annual returns of 6% to 10% on a retirement portfolio, without taking much risk. Add Social Security and other pension payments, and a $1 million nest egg was more than adequate for most people.

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A_Simple_Man

 

 

I don't place any value on articles like this because the writers just assume

 

The writers get paid to drum up search 'hits', likes and comments.  All the writer 'assumes' is that if people are reading and commenting on his articles then he is guaranteed another gig from that buyer.

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Enuff

 

 

SS for my daughter is part of the safety net

 

why on earth would someone start a family so late in life without having the means to support it?

 

I hope the government closes this loophole soon, I'm tired of my taxes supporting children.

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rainymike

why on earth would someone start a family so late in life without having the means to support it?

 

I hope the government closes this loophole soon, I'm tired of my taxes supporting children.

 

It's not a loophole. There is nothing ambiguous about the law.  Here's a quote from Social Security:

 

http://www.ssa.gov/history/studentbenefit.html

 

 

The basic concept of the Social Security program is that it is designed to partially offset the loss of income to the family when a worker retires, becomes disabled, or dies. The rationale for paying benefits for minor children was that when a retired or disabled wage earner has dependent children, the amount of lost earnings that need to be replaced are greater than if the worker is single, and so a benefit is paid for each dependent child. The Social Security Board explained the provisions of the 1939 Act in this regard as follows:

"The practical objective of the old-age insurance provisions is to prevent old-age dependency. The effectiveness of the program will be measured by the extent to which it enables the worker to maintain himself in his old age without benefit of public assistance or relief. This practical objective necessitates . . . the recognition that the benefits to annuitants who have wives or children to support must be larger than the benefits of those annuitants who have no dependents . . . Therefore, it is desirable that, as early as possible, benefit payments be at least sufficient in amount to afford subsistence to the aged recipient and his dependents. This is accomplished under the amendments in two ways: . . . (2) supplementary benefits related to the wage earner's own benefit are provided for his wife if over age 65 and for his children if under age 18. This recognizes the greater presumptive need of families in which the wage earner has such dependents." {1}

 

Now you can disagree with the law. That's fine by me. LOL ... but in the meantime, I'm going to make full use of any legitimate benefits owed me or my kids. And it's money that I basically put into SS anyway.

 

In any event, I pay taxes so the government  can support wars, gays, ethnic minorities, white people, communists, anti-communists, Indians, cowboys, crappy educational programs, old farts, babies, sick people, healthy people, artists, poor people, other countries, armies and navies, trips to the moon, and research on frogs in Guatemala. Sorry ... my little girl beats all of them out ... and is worthy of your and my tax dollars ... LOL. 

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Enuff

 

 

offset the loss of income to the family when a worker retires, becomes disabled, or dies

 

if you have a child AFTER retirement, there is nothing to offset

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smokey

if you have a child AFTER retirement, there is nothing to offset

I think I will take out an add ... foreigner looking to make a baby with you can offer 18 years of income send 12 by 12 glossy photo ..... disclaimer application might take a few sessions :yahoo:  

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smokey

if you have a child AFTER retirement, there is nothing to offset

come on back in 1939 the powers to be did not expect old timers to be living with young fertile women they figured by the time we hit 65 our wives would be to old to give birth... guess they never figured on cherry blossom and the internet making it easy

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