Planning for retirement involves more than reaching a savings goal—it requires understanding the realities of how you’ll spend in retirement. By debunking common retirement spending myths, you can make more informed financial decisions and enjoy a secure, fulfilling future.

Resources:

• • FREE RETIREMENT READINESS REPORT
  • Stop Calculating Retirement Expenses Wrong (Do This Instead)
  • Will Your Spending Go Down in Retirement?

Top 5 Retirement Spending Myths That Could Sabotage Your Plans

Retirement planning involves more than hitting a savings target. Many people assume they understand what to expect, yet several retirement spending myths can seriously derail even the best-laid plans. Here, we’ll tackle five popular retirement spending myths and uncover the truths, so you can enjoy a financially secure retirement.

Myth 1: Downsizing Your Home Always Saves Money

One common retirement spending myth is that downsizing your home will automatically save money. Downsizing sounds like an easy way to cut costs, but hidden expenses, such as renovations, moving costs, and potential property tax increases, can quickly erode savings. Plus, if you relocate to be closer to family, ongoing travel expenses to maintain those connections may add up.

Truth: While downsizing can reduce certain costs, remember to consider all associated expenses. Evaluate both immediate and long-term costs to ensure downsizing supports your retirement spending goals.

Myth 2: Retirement Spending Will Be Lower Than When You Were Working

Another retirement spending myth is the assumption that expenses drop significantly in retirement. The reality is, spending often increases in the early retirement years, due to travel and hobbies. Later on, healthcare expenses rise, creating additional demands. This spending pattern, known as the “retirement spending smile,” can be a real surprise.

Truth: Retirement expenses fluctuate. Planning for active early years and healthcare in later years helps give a clearer view of your retirement spending needs.

Myth 3: Taxes Will Be Lower in Retirement

A big retirement spending myth is that taxes will naturally decrease once you retire. Depending on your income sources, you could actually face a higher tax bracket—especially when required minimum distributions (RMDs) kick in from retirement accounts. Income from Social Security, pensions, and other investments can add up fast.

Truth: Don’t assume retirement will mean a lighter tax burden. Working with a tax professional to map out future distributions and consider Roth conversions can make a big difference for your retirement spending plan.

Myth 4: You’re Likely to Run Out of Money

Another top retirement spending myth is the fear of outliving savings. While this worry is common, most retirees actually adjust spending habits if they see savings dwindling. Usually, they cut back on discretionary spending when needed.

Truth: Stay flexible with your spending. Monitoring your finances closely and adjusting when necessary helps reduce the risk of running out of money in retirement.

Myth 5: Budgeting Accurately Predicts Retirement Expenses

Believing that budgeting will perfectly predict future expenses is a common retirement spending myth. However, retirement is often filled with unforeseen expenses and life changes. Health issues, family support, or market shifts can all impact your retirement spending plan.

Truth: Instead of a rigid budget, aim for a flexible spending strategy with a buffer for the unexpected. This can help you adapt more easily to changes in retirement spending needs.

Final Thoughts on Retirement Spending Myths

By identifying and addressing these retirement spending myths, you can sidestep financial strain and make informed decisions. A strong retirement plan considers fluctuating expenses, potential tax burdens, and the realities of healthcare costs. Understanding these myths will help you create a secure retirement plan, so you can enjoy the freedom you’ve worked hard to achieve.

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures