Retirement is often thought of as a far off and hard to achieve nirvana, here are a few endearing myths that may throw off your financial planning.
"I'll spend less when I retire"- All the ads showing the perfect retirement show people traveling, golfing, laying on the beach or spending time (aka money) with their grandkids. I bet you spend more money on weekends when you aren't working, compared to days you are in the office. Most things you buy now will get more expensive as time goes on. In my experience most people will spend similar or potentially even more money in retirement. This isn't even taking into account Medical expenses.
"My taxes will be lower when I retire"- You may end up in a lower tax bracket. You may also end up with a similar tax bill once everything is said and done. Don't forget money you pull from an IRA or your 401(K) will be taxable. Even part of your Social Security may be taxable.
"What's the point, I'll never be able to retire"- It's obviously easier to plan for retirement the earlier you get started. However, it's never too late to improve your retirement plan, and increase your nest egg contributions. If you are 50 or older you can put away up to $23,000 into a 401(K) plan each year. Also the longer you work, the less years of retirement you will have to save for.
"I can stop investing once I retire"- With many people spending 30+ years in retirement, your investing days are far from over when you end your working days. If you quit investing, you can face a great drop in your purchasing power as inflation sets in, or even face running out of money later in life.
"I'll help my kids pay for college before I retire"- Always remember that there is no financial aid for retirement. You can help your children, but make sure you aren't sabotaging yourself in the process. While I know student loan debt can be a burden, so is a parent living on their kids couch....
"No one really retires any more"- I've been a financial planner for more than a decade and I've heard this from quite a few people. I know many people who love their jobs, and will continue working as long as they continue to enjoy it. If you don't want to ever retire, still plan for FINANCIAL INDEPENDENCE- essentially the day that work becomes an option. That way you have the ability to cut back, take the long trips you want, and have the funds to maybe even take your career or business in a new path that further stokes your passions.
There is no one size fits all calculator, or formula on when to retire, what you should do to get retired, and how you can stay there. But some of the above myths may back you into a corner, and force you to make choices you don't want to have to make in retirement. Be smart and work with a trusted financial planner to make sure you get the retirement you want and deserve.
Securities and advisory services offered through National Planning Corporation (NPC), member FINRA and SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities.
To learn more about David Rae, view his Paladin Registry profile.
Originally posted on Paladin Registry.
About the Author: David Rae CFP®, Vice President of Investments with Trilogy Financial. For more than a decade David has been advising a diverse audience of couples, singles, doctors, small business owners, Honda Boeing and Toyota Employees. David Rae enjoys working in the Financial Planning profession where he can use his unique problem solving abilities to help you make your dreams a reality. These comprehensive financial plans may include but are not limited to income for retirement, tax planning and estate issues, portfolio revision, life insurance, portfolio management and business exit strategies. David has been seen, quoted and published in many national publications including MSN Money, NBC News, The Today Show, Huffington Post, Yahoo News.Make sure to read his column for Echelon Business Magazine about various Financial Topics "Be Advised or Beware" He is also appears regularly on the KTLA News and is a regular contributor to The Advocate Magazine. Follow him on Twitter @davidraecfp