If you ever plan to retire, you have to have a plan. The days of depending on an employer pension and government benefits are rapidly disappearing and, especially if you are under 50, you are living in a “yoyo” economy — short for “you’re on your own.”
There are a bunch of myths about retiring that need to be abandoned.
- It’s OK to postpone saving for retirement until other needs are taken care of. Wrong. There are always “other things” that interfere with saving for retirement and if you let them get in the way, you’ll never start.
- Medicare will take care of almost all your health care needs. In reality it will cover about half.
- You’ll need far less income in retirement to maintain the same standard of living. Only if you decide to become a hermit.
- You can claim Social Security early and still get full benefits later. Wrong. When you begin taking benefits you are locked in (unless you pay it all back).
- You should rely heavily on bonds rather than stocks as you get older. Only if you plant to die soon and expect zero inflation.
- Any retirement target-date fund will allow you to “set it and forget it.” Target date funds vary widely in performance and there are no guarantees associated with them.
- You’ll be able to make up a savings shortfall by retiring later or working part-time in retirement. That’s a hope, not a plan. You may not be physically able to work after retirement. Because of the costs of benefits, many employers are reluctant to hire older workers.
A plan is needed, and needs to be constantly updated to keep you on the path to the kind of retirement that you want.