One of the greatest myths for future retirees is that expenses will drop when you retire. Some think their living expenses will virtually cut in half overnight.
However, that is usually not the case. In fact, oftentimes retirees spend more in retirement (especially in the first few years) than they did during their working days. Why is that?
Myth #2 – Social Security Will Provide for Most of My Retirement Needs
Many people are led to believe that they’ll manage to live just on Social Security in retirement. In most cases, however, that’s just not doable. Today, Social Security pays the average recipient only $1,461 a month in benefits. Over the course of a year, that’s $17,532. Meanwhile, the average retired household spends $46,000 a year. So there is a pretty large disconnect between the two. Property taxes alone in some blue states amount to what some receive all year in Social Security payments.
Myth #3 – I Can Just Keep Working
Surveys show that many people nearing retirement would prefer to continue working to close any gaps they feel they have in their retirement funding. Or they want to continue working because they have no plans for their free time after they retire. Regardless of which reason, they want to keep working- and it does provide a dual benefit- it gives a further boost to your nest egg while at the same time reduces the number of years you’ll need to live off it.
Myth #4 – It’s Too Late To Start Saving
They say the eighth wonder of the world is compound interest. And it obviously has a bigger effect the earlier you start saving, but you’re never too old to take advantage of its power to grow your money.
Aside from compounding, the IRS gives other incentives to save for those nearing retirement. IRAs, 401Ks, and other tax-advantaged plans give investors that are 50 and older the ability to make ‘catch up’ contributions. Those Traditional and Roth IRAs can make an additional $1,000 each year per investor. 401Ks and like plans can add $6,000 as a catch-up.
Myth #5 – Taxes Will Be Much Less In Retirement
As you’ve seen in previous points, where we show your need to save more, invest more, and possibly work more – you will probably not be reducing your overall income that much. So if your income isn’t going to drop, then you shouldn’t assume with any honesty that your tax bill will drop.
The Trump tax cut reduced rates, but removed certain deductions. Even if we call it a wash, not many would bet that rates would drop further from here. The easy bet would be to wager they will only rise from here.
Syndicated columnist Mark Shields and New York Times columnist David Brooks join Judy Woodruff to discuss the week’s political news, including the first debates for 2020 Democratic candidates, whether that party has shifted too far to the left to be viable and Supreme Court decisions on partisan gerrymandering and including a citizenship question on the 2020 census.
Click on “Play” button above to listen to podcast.
“An Ode To The Land Of Little Rivver” is a gorgeously filmed promotional short film celebrating the beautiful Catskills region of New York State. Filmed on location at the Livingston Manor Fly Fishing Club for the design and lifestyle firm Homestedt by Peter Crosby of Bullrush Films.
“The game of chess is believed to have originated in India, before spreading via Iran into Arab countries and from there to Europe. The nexus of the Islamic world is the focus of Deborah Freeman Fahid’s fascinating catalogue of chess and other games pieces from the private al-Sabah collection in Kuwait, published by Thames & Hudson last year. At the heart of the collection is a group of rock-crystal pieces, believed to have been made in Egypt, Iraq or eastern Iran sometime around the 9th century, and deposited in the late 11th century in a monastery in Àger in Catalonia.”
From Apollo Magazine (June 25, 2019 Issue)
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