Being able to accurately predict every aspect of your retirement is about as likely as a meteorologist forecasting the weather correctly every single time. It is not uncommon for retirees to have their retirement play out differently than they may have assumed, but understanding some of the common retirement misconceptions can help get you closer to your ideal scenario.
Do retirees actually “outlive” their money?
The notion that retirees will inevitably “outlive” their money is a concept rooted in past generations, when retirement often meant having to live off dwindling resources. This ultimately led to the creation of Social Security which is still a common supplement to retirement strategies today.
While it is true that unexpected health issues can pose significant financial challenges later in life, working with an advisor can help you craft a robust retirement strategy that will take into account such unforeseen expenses.
Retiring on 70-80% of your salary may not be feasible
A quick internet search might yield the suggestion that new retirees should strive to retire on 70-80% of their salary, but that may not be attainable for everyone.
Most new retirees often want to travel, explore new endeavors, learn a hobby, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend as much as they did before retirement.
For many, median household spending increases on the way to a retirement transition. However, with a well-crafted financial strategy, household spending tends to decrease after age 65.1
Practice makes perfect, even in retirement
On average, households headed by those older than 65 spend 28% less annually than younger households. Although healthcare spending typically increases in retirement, other costs like transportation and housing expenses tend to decline.1 Finding a suitable balance for your expenses in retirement can help you maintain your ideal lifestyle.
Retirement may arrive earlier than expected
In 2022, the average retirement age was 61 years old. Many people end up retiring earlier than expected due to things like career changes, health complications, or having to care for a loved one, which can lead to claiming Social Security benefits earlier than planned.
Individuals are eligible to begin claiming benefits at 62, but this number is significantly reduced until one reaches their full retirement age. Therefore, it is important to consider all the various implications before drawing down your retirement savings.2
Live the life you want to live
In general, it seems that American retirees are in a good situation when it comes to their financial well-being. According to a recent survey, 7 in 10 retirees expressed confidence in having saved enough money to live comfortably throughout their retirement years.3 This positive outlook reflects the financial preparedness and stability that many retirees in the United States have managed to achieve, providing a sense of security and peace of mind as they transition into retirement.
Remain flexible in retirement
As you approach retirement, it’s important to recognize that your actual retirement experience may differ from the one you have envisioned. However, the good news is that you can still create a flexible retirement strategy that aligns with your goals.
Consult with an advisor today to explore the options that make the most sense for you and start planning for your ideal retirement.
1BLS.gov, 2023
2NerdWallet.com, July 18, 2023
3EBRI.org, 2023