[Editor’s note: A lengthier version of this article appears here.]
During your working years, you may have rarely thought about your retirement. When you did, you probably had only a vague, general notion of what your retirement would be like. For many years your retirement probably seemed so far off that you could easily postpone learning, planning and saving for it. As a result, you may have some misconceptions about what retirement is really like, both financially and in terms of your post-career lifestyle.
Here are eight common retirement myths, followed by the reality that belies each of them.
1. Retirement is the beginning of the end.
When the Social Security system was first introduced in 1935, the average life expectancy in the United States was 62. The original Social Security system began paying benefits at age 65. The government’s expectation at that time was that people would work until they turned 65, and then have only a few more years left.
Today, the average life expectancy is 79. You may live well into your 80s and 90s, which is 20 to 30 years after you quit working. You will probably be healthy and active for many of those years. Retirement can be a time of freedom and fulfillment, if you envision and plan for it that way.
2. Retirement will be a permanent vacation.
If your vision of retirement is years of non-stop recreation, entertainment and travel, you will probably be disappointed. While you will have time for some leisure pursuits, there will still be mundane household tasks, grocery shopping and visits to the doctor’s office. Even if you could play golf or lay on a beach every day, you would tire of that quickly.
3. You are miserable now, but you will be happy after you retire.
While quitting your job will remove some stress and unpleasantness from your life, happiness won’t come simply because you stop working. You’ll be happier if you have something you are excited about retiring to rather than thinking only of what you’re retiring from. You will benefit from a mix of activities that provide you with physical exercise, mental stimulation, socialization, and fulfillment.
At a more basic level, happiness has more to do with how you approach your life regardless of what stage you’re in. If you’re a happy person before you retire, you’ll probably be a happy person after you retire. If you’re miserable today, you’ll probably be miserable tomorrow unless you change your outlook and approach to life.
4. Retirement means the end of work.
While retirement does mean the end of work in the traditional sense, this doesn’t necessarily mean that you will never work again. Some people will replace work with volunteering and a growing percentage of retirees will return to the paid work force in some capacity. According a Merrill Lynch survey, 72% of pre-retirees age 50 and older say they plan to work part-time, full-time, or in an entrepreneurial endeavor after they retire from their primary career.
People who work during retirement aren’t necessarily doing it for the money or the health benefits. Some are working to follow their passion, stay mentally active, remain physically active, enjoy social contact, and have a sense of purpose or contribution. They are likely to choose an option that affords flexibility, involves fewer hours, and is fun and rewarding.
5. You can wait a few more years to start saving for retirement.
When you’re in your 20s, saving for retirement may be one of the last things on your mind. You’re eager to get your adult life started. You want to buy a new car, have fun with your friends, pay off student loans and maybe start saving for a down payment on a house. But after you buy your first house, there will be furniture, kitchen appliances, curtains, décor, and many other things to buy. There will be vacations to take. If you have children, they will require a significant expenditure for at least a couple decades.
The earlier you begin the habit of saving for your retirement, the more years your money will have to compound and grow.
6. The government will take care of you after you retire.
If you are a career government employee, the government will take care of you pretty well. But if not, and you’re counting on only Social Security, Medicare and Medicaid, you’re in for a very austere retirement. The average monthly Social Security check for retired workers was $1,355 in November, 2016. Social Security was never intended to provide complete retirement income. It only exists to provide a minimal safety net so that seniors won’t starve in the street.
Medicare doesn’t pay for everything, either. A 65-year-old couple retiring this year will still need approximately $260,000 to cover medical expenses throughout their retirement, according to Fidelity Investments.
7. Your family will take care of you after you retire.
Your children are going to have plenty of financial obligations already, such as raising their children, maintaining their household and trying to save for their retirement. What if your kids are barely scraping by when you reach the point where you will need to rely on them?
Having to live with your grown children and perhaps their children can be stressful for all parties. It’s true that in some cultures, multi-generational households are common and the societal norm is for grown children to take care of their aging parents. Even if this is the case for you, an honest evaluation of your circumstances and your family’s resources and attitudes may be in order.
8. Your employer’s pension will take care of you after you retire.
If you have spent most or all of your career at an employer that offers a traditional pension plan, you might retire with an adequate pension. In the United States, company pension plans have been shrinking and disappearing over the past few decades. Today, most workers don’t remain at the same company long enough to qualify for a pension that will provide a significant income stream.
State and federal government employees (which include military servicemen and women) are most likely to benefit from a satisfactory pension plan. But as governments continue to struggle under the burden of massive deficits and pension plans continue to disappear in private industry, government pension plans may be reduced or eliminated in the future.
Retirement can be a fulfilling, enjoyable and lengthy chapter of your life. The best way to ensure that it will turn out this way is to approach your retirement with your eyes wide open, so you’ll have a realistic and fact-based view on what your retirement will be like from both a financial perspective and a lifestyle perspective.
What preconceived notions about retirement did you once have that you since learned were inaccurate? Scroll down to share in the comments.
© 2016 Dave Hughes. All rights reserved.
Crumpled paper: Charley. Some rights reserved.
Hammocks on beach: Jdmoar. Some rights reserved.
Wall of coins: Jenifer Correa. Some rights reserved.
Multigenerational family: OakleyOriginals. Some rights reserved.