Retirement myths abound.\u00a0\u00a0<\/p>\n
Many Americans harbor basic misconceptions about Social Security, Medicare and other pillars of retirement.\u00a0<\/p>\n
Here are\u00a0six\u00a0of the biggest misconceptions about retirement planning. Our story draws from a June\u00a0report\u00a0from the Center for Retirement Research at Boston College.\u00a0\u00a0<\/p>\n
Social Security won\u2019t be there when I retire\u00a0<\/p>\n
Anyone who follows Social Security\u00a0news\u00a0knows the retirement trust fund faces a fiscal cliff.\u00a0<\/p>\n
More money is going out of the trust fund than coming in. If Congress doesn\u2019t act, the federal program will\u00a0run short of cash by 2032.\u00a0\u00a0<\/p>\n
News reports warn\u00a0that Social Security is running out of money, going broke. That language is figurative and imprecise, but many Americans take it literally.\u00e2\u0080\u00af\u00a0<\/p>\n
Nearly two-thirds of us believe that when the shortfall arrives,\u00e2\u0080\u00afbenefit payments will cease.\u00e2\u0080\u00afThat finding\u00e2\u0080\u00afcomes from\u00e2\u0080\u00afa\u00e2\u0080\u00afpaper\u00e2\u0080\u00afby researchers\u00e2\u0080\u00afat\u00e2\u0080\u00afUCLA and Cornell University.\u00a0<\/p>\n
In fact, when the reserve runs\u00e2\u0080\u00afout,\u00e2\u0080\u00afif nothing is done,\u00e2\u0080\u00afthe federal agency will have sufficient funds to pay about 83% of full benefits,\u00e2\u0080\u00afaccording to\u00e2\u0080\u00afan\u00e2\u0080\u00afestimate from\u00e2\u0080\u00afAARP.\u00e2\u0080\u00af\u00e2\u0080\u00af\u00a0<\/p>\n
There\u2019s a big difference between 83% and zero, but many Americans don\u2019t see it.\u00a0<\/p>\n
\u201cIt just seems to me that people are jumping to the conclusion that it\u2019s going to be gone,\u201d\u00a0said Luke Delorme, a certified financial planner in Great Barrington, Massachusetts, who wrote the Center for Retirement Research post.\u00a0<\/p>\n
Those across-the-board cuts will happen only\u00a0if nothing is done. Policy experts widely believe Congress will step in to rescue the program.\u00a0\u00a0<\/p>\n
Many\u00a0potential fixes\u00a0involve collecting more payroll taxes from the wealthy, or capping their benefits. In any case, experts say it\u2019s unlikely\u00a0current\u00a0retirees\u00a0or near-retirees\u00a0will see significant benefit cuts.\u00a0<\/p>\n
I won\u2019t need long-term care\u00a0<\/p>\n
The long-term care industry serves people who cannot perform everyday activities, like dressing or eating, without help.\u00a0And more than 80% of Americans will need that help at some point, according to\u00e2\u0080\u00afa study\u00e2\u0080\u00affrom the Center for Retirement Research.\u00a0<\/p>\n
Yet, most Americans\u00a0seem to\u00a0think\u00a0they won\u2019t need long-term care.\u00a0In one 2024 survey of affluent older Americans, Boston College researchers found\u00a0that\u00a0long-term care ranked fifth among financial worries in retirement, behind stock market turbulence, Social Security cuts and other concerns.\u00e2\u0080\u00af\u00a0<\/p>\n
\u201cPeople don\u2019t want to think about it,\u201d\u00a0said\u00e2\u0080\u00afKeith Singer, a certified financial planner in Boca Raton, Florida.\u00e2\u0080\u00af\u201cIt\u2019s hard to imagine not being able to take care of yourself.\u201d\u00a0<\/p>\n
Retirees ignore long-term care at\u00a0their\u00a0peril. Assisted living communities charge $6,200 a\u00a0month, on average, according to\u00a0CareScout. A home health aide costs about $75,000 a year, Delorme reports.\u00a0\u00a0<\/p>\n
Medicare covers\u00a0long-term care\u00a0<\/p>\n
Here\u2019s another common misconception about long-term care:\u00a0Medicare will pay for it.\u00a0\u00a0<\/p>\n
One\u00a02025\u00a0survey\u00a0by Nationwide found that 58% of U.S. adults wrongly believe Medicare covers long-term care.\u00a0<\/p>\n
Some confusion is natural.\u00a0The federal health insurance program for seniors does cover some\u00e2\u0080\u00afshort stays in nursing homes.\u00e2\u0080\u00af\u00e2\u0080\u00af\u00a0<\/p>\n
But Medicare generally does not cover longer stays. The reason: Most long-term care is not considered medical care.\u00e2\u0080\u00af\u00e2\u0080\u00af\u00a0<\/p>\n
\u201cImagine what you go to the hospital for,\u201d Singer said.\u00a0\u201cThat\u2019s what Medicare covers.\u201d\u00a0\u00a0<\/p>\n
You need $1 million to retire\u00a0<\/p>\n
Americans love to read stories that estimate the\u00a0retirement \u201cmagic number\u201d: A savings target that will guarantee a comfortable retirement.\u00a0\u00a0<\/p>\n
One recent survey from Schroders put the magic number at $1.2 million. A Northwestern Mutual survey put the figure at $1.46 million.\u00a0<\/p>\n
\u201cClients are always looking for a silver bullet: You hit a million dollars,\u00a0and you retire,\u201d\u00a0said\u00e2\u0080\u00afDinon Hughes, a\u00a0certified financial planner in Portsmouth, New Hampshire.\u00a0<\/p>\n
Magic numbers might serve as a useful guidepost, in an era when American workers are expected to save for their own retirement.\u00a0\u00a0<\/p>\n
Retirement experts caution, however,\u00a0that every retirement plan is different.\u00a0\u00a0<\/p>\n
Most retirees\u00a0have nowhere\u00a0near $1 million in savings. Millions of Americans\u00a0retire comfortably\u00e2\u0080\u00afon Social Security income alone.\u00e2\u0080\u00af\u00e2\u0080\u00af\u00e2\u0080\u00af\u00a0<\/p>\n
I won\u2019t need\u00a0stocks\u00a0in retirement\u00a0<\/p>\n
Retirees often assume\u00a0they have no more need of long-term investments, like stocks, Delorme writes.\u00a0<\/p>\n
That misapprehension relates to another: The idea that retirement doesn\u2019t last very long.\u00a0<\/p>\n
Retirees commonly underestimate how long they will live. A woman of 65, for example, is likely to live\u00a0another 22 years.\u00a0\u00a0<\/p>\n
Retirement planners\u00a0often\u00a0assume\u00a0an even longer\u00a0retirement, to cover the scenario where you live to 90\u00a0or 100.\u00a0<\/p>\n
That means a\u00a0new\u00a0retiree might\u00a0still\u00a0be spending money\u00a020 or\u00a030 years from now.\u00a0With that time horizon,\u00a0experts say,\u00a0it makes sense to stay in the stock market.\u00a0<\/p>\n
\u201cAt 60, 65, even 70, most clients have a 20-year span ahead of them, which is plenty of time to be investing in the stock market,\u201d\u00a0Hughes said.\u00a0<\/p>\n
My taxes will be much lower in retirement\u00a0<\/p>\n
As a general rule, Americans can expect a lower tax rate in retirement. Your income typically drops. Retirees tend to spend less.\u00a0Not all Social Security income is taxed.\u00a0\u00a0<\/p>\n
But retirees might\u00a0be surprised at how much tax they do pay.\u00a0\u00a0<\/p>\n
Withdrawals from traditional 401(k) and IRA accounts are taxed as income.\u00a0Consider\u00a0Social Security, pensions and other income, \u201cand some retirees find themselves in a higher bracket than they expected,\u201d Delorme writes.\u00a0<\/p>\n
A large IRA\u00a0balance on a\u00a0computer\u00a0screen might give retirees false\u00a0hope, experts say, because the money hasn\u2019t yet been taxed.\u00a0\u00a0<\/p>\n
\u201cTaxes hurt 10 times more in retirement, because you\u2019re not earning that income,\u201d Hughes said. \u201cIt\u2019s coming out of an account that is your life savings, and it has to last you for the rest of your life.\u201d\u00a0<\/p>\n
This article originally appeared on USA TODAY: Is Social Security broke? 6 big retirement misconceptions<\/p>\n
Reporting by Daniel de Vis\u00e9, USA TODAY \/ USA TODAY<\/p>\n
USA TODAY Network via Reuters Connect<\/p>\n","protected":false},"excerpt":{"rendered":"Retirement myths abound.\u00a0\u00a0 Many Americans harbor basic misconceptions about Social Security, Medicare and other pillars of retirement.\u00a0 Here…\n","protected":false},"author":2,"featured_media":598393,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[177],"tags":[79,4585,18,19,17,153565,5,234,235],"class_list":["post-598392","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-consumer","tag-eire","tag-ie","tag-ireland","tag-nation-world","tag-news","tag-personal-finance","tag-personalfinance"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116963192754035114","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/598392","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=598392"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/598392\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/598393"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=598392"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=598392"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=598392"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}