Want a Secure Retirement? Don’t Fall for These 6 Retirement Myths

Who doesn’t want to build wealth and have the retirement of their dreams? Listen, it’s not going to happen if we get sidetracked by naysayers and all the misinformation swirling around out there.

Market chaos, inflation, your future—work with a pro to navigate this stuff.

Maybe your broke uncle says, “The little man can’t get ahead,” or your buddy always agrees with some sketchy financial “expert advice” on social media (stick to funny dance videos, TikTok). No matter where they come from, myths and lies like that could keep you from taking the steps you need to take to secure your retirement future. 

So, get ready because today we’re going to bust the top six retirement myths! When you know the truth, you can start building the retirement of your dreams today.

Myth 1: I’ll Live Off Social Security Income

This is a common one . . . but relying on the government to take care of you in retirement is dumb with a capital D. Here’s the reality: Living off Social Security will only lead to insecurity.

The problem is, there’s a huge gap between what future retirees think they’re going to receive from Social Security and what they’re actually going to get.

Right now, retirees receive an average monthly income of $2,071 from Social Security.¹ That’s about $24,800 per year. That’s barely enough to keep the lights on and put food on the table, let alone actually enjoy a comfortable retirement! And yet, a recent poll found that almost 40% of Americans don’t expect to need any source of retirement income beyond Social Security.² Yikes.

And the news gets worse for those who aren’t retiring for a while, because the latest projections show that Social Security benefits will only be able to pay 77% of total scheduled benefits by as early as 2033 unless Congress takes action.³ 

Do you really want your quality of life to depend on how Congress votes during some crisis in the future? If you want to travel the world, start that business, or pursue your dreams in retirement, this is your wake-up call. Social Security just isn’t going to cut it. It’s time to take matters into your own hands and begin building your retirement future today.

Bottom line: Your retirement is your job, not the government’s.

Myth 2: If I Invest Up to My 401(k) Match, I’ll Have Enough to Retire

Okay, if your company offers you a match on your 401(k), take that match! It’s a fantastic place to start investing. But stopping there is like building half a bridge or a house without a roof. Building a solid nest egg means investing a full 15% of your income for retirement. If you don’t invest beyond the match, you’re leaving the job half done.

Sound scary? Not if you’ve built a solid foundation for your finances first! When it comes to wealth building, we believe in the Baby Steps (investing for retirement doesn’t happen until Baby Step 4). So, what are those first three steps?

Before you start investing, you need to pay off all your debts (everything except your mortgage) and save up an emergency fund to cover 3–6 months of expenses. That allows you to fully commit to investing with your most important wealth-building tool—your income. With no debt and a full emergency fund, you’ll have plenty of room in your budget to invest 15% of your income for retirement.

Once you’re ready for Baby Step 4, here’s what we recommend:

• If you have a traditional 401(k): Contribute up to your employer’s match in your 401(k), then work with a pro to invest the rest in a Roth IRA. If you max out your Roth IRA and still haven’t hit 15% of your income, go back to your 401(k) to get to 15%. 
• If you have a Roth 401(k): You’re in luck! As long as you have good mutual fund investment options, you can invest your full 15% in your workplace account.

 

If you wanted to retire at age 70 and invested $625 per month starting at age . . .

Starting Age	25	35	45	55	65
Retirement Account Balance*	$9,342,756	$3,080,184	$985,083	$284,180	$49,698

*Retirement account balance based on an 11% annual rate of return. The S&P 500 has a historic annual rate of return between 10–12%.

 

There’s a whole group of folks out there called Baby Steps Millionaires who have worked and saved their way to millionaire status the Ramsey way. They consistently invested 15% of their income into their 401(k)s and IRAs month after month, year after year . . . until one day they looked up and realized they had a million-dollar net worth!

Dave Ramsey’s national bestselling book Baby Steps Millionaires will show you the proven path to becoming a millionaire. The stories in this book are inspiring because they’re all about how everyday people did the smart thing with their money—and their time. Grab your copy today!

Myth 3: I’ll Work Through Retirement

Whether it’s crushing health care costs, higher-than-expected living expenses, or simply because they can’t afford to retire, 61% of workers say they plan to work during their retirement years. Yet once they actually retire, fewer people actually end up working like they thought they would.⁴

Listen, if you end up still working in some capacity in retirement, it should be because you want to—not because you have to. So between now and then, do all you can to set yourself up for a comfortable retirement that doesn’t require you to work a job to pay the bills. If you’re struggling to see how that’s possible, maybe it’s time to figure out why.

You can start by learning how to control the way you behave with money. Check out Rachel Cruze’s book Know Yourself, Know Your Money, so you can learn more about why you handle money the way you do—and what you can do about it now.

Myth 4: Medicare Will Cover My Medical Expenses

There’s a lot of confusion about Medicare (the government-provided health insurance program for folks age 65 or older) and what it can and can’t do. So, let’s clear the air here.

Medicare can give you affordable health insurance coverage for doctor visits, medication and hospitalization once you blow the candles out on your 65th birthday cake. That’s the good news.

However, Medicare doesn’t cover the cost of deductibles, copays or any long-term care, like the care you’d receive in a nursing home or assisted living facility that lasts more than 100 days. Those costs are on you. That’s the bad news.

This is really important because the biggest health expense in retirement is long-term care. Here are some numbers to keep in mind:

• The median annual cost for care at an assisted living facility is $70,800, and a private room at a nursing home costs nearly twice as much ($127,750).⁵ 
• Someone turning 65 years old today has almost a 70% chance of needing long-term care of some kind.⁶
• In extreme cases, some couples could need up to $428,000 for health care expenses in retirement—even if they have Medicare.⁷

Listen, just like good ol’ Social Security, the future of Medicare is also pretty murky if you’re not retiring in the next few years. That’s because Congress might raise the eligibility age, increase premiums, or reduce coverage in order to cut costs and keep Medicare benefits flowing for future retirees.

That means that regardless of Medicare, you need a plan to cover all these health costs in your golden years! Here’s how to safeguard your retirement from medical expenses:

• Step 1: Get long-term care insurance the day you turn 60. It’s not a fun birthday gift, but you’ll reap the rewards if you or your spouse ever need this service. 
• Step 2: Kick your retirement savings into high gear. The sooner you realize you can’t rely on Medicare, the more time you have to ramp up your savings. 
• Step 3: Do you have an insurance policy with a Health Savings Account (HSA)? If you do, your HSA (think of it as a “Health IRA”) could help you fill the gap and pay for medical expenses that Medicare can’t pay for. Not only does the money you invest in an HSA grow tax-free, but you can also take out money in retirement to pay for medical expenses without paying any taxes on it. That’s a win-win!

Myth 5: It’s Too Late for Me to Save for Retirement

If you feel scared about your retirement future, here’s the truth: No matter how close you are to retiring, there’s still time to grow your retirement savings.

Let’s say you turn 40 this year and bring home around $4,000 a month. By investing 15% of your income until you retire, you could end up with a nest egg worth close to $1.2 million.

Well, that’s great if you’re 40. But what if you’re 50? Contribute 25% of your income toward retirement until you’re 67 and you could have $592,000. Is that better than zero? You bet it is!

But who says you have to retire at 65 anyway? It’s not a law. You don’t suddenly stop being productive or lose all your value as a human being at age 65. Sure, it’s a big moment, but it doesn’t have to be your personal finish line.

In fact, you wouldn’t be the first person to start something entirely new at 65—not by a long shot. Remember Colonel Sanders, the founder of Kentucky Fried Chicken? He made it big at exactly 65. So did Laura Ingalls Wilder, who published the legendary Little House on the Prairie book series while she was in her 60s. Our point is, a vibrant, productive life doesn’t have to begin shutting down at some random, government-mandated age.

No matter how old you are or how much you’ve saved so far, you’ve got the rest of your life in front of you! Don’t waste another minute assuming the government will take care of you in your later years. We hope it’s clear by now that the more time your money has to grow, the more compound growth can work in your favor.

Myth 6: I Can Handle Retirement Planning on My Own

Life isn’t a solo sport—you need people to help you get to where you want to go. When it comes to investing, it can be tempting to fly solo and guess your way through it. But there’s a reason why every flight you’ve ever been on has both a pilot and ­a copilot in the cockpit. When you’re on your own and you don’t know what you’re doing, you might crash and burn or end up way off course from where you want to be. (Nobody wants that.)

Working with an investment professional will give you confidence that you’re heading in the right direction and help you focus on the long-term game. And it’s more than just confidence. It’s building a quality team around you to help you make the right moves.

Ready to start investing? We’ll pair you up with an investment professional for free. Check out SmartVestor today and start saving for your future.

 

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.