The 11 Biggest Retirement Lies We Tell Ourselves
4. I’m counting on Social Security, so I don’t need to save that much.
Maybe today’s retirees can say this. But the future of Social Security is so uncertain that anyone retiring in the coming years should not plan to rely on it. Why? The amount of money going into the program is not enough to give everyone the benefits they’ve been promised. Thankfully, the Chase/LearnVest study shows that seven in ten women are not confident that they will receive Social Security. But if you are one of the three in ten that believes you will, listen up:
If you’re 25 now, and you earn a hefty $115,000 a year now, you can expect to receive only about $3,231 a month in today’s dollars ($38,772 a year) if you retire in 2051 at age 70. Of course, this is the best-case scenario. If you’re 25 and earn $35,000 a year (much more likely), you can expect to only get $977 a month ($11,712 a year) if you retire at 62. That’s poverty-level income.
5. I deserve to have fun with my money today–I work hard for it.
Saving for retirement is not an either/or proposition. You can save for retirement and enjoy life now. Here’s how: the 50/20/30 Rule. This budgeting guideline says that:
- No more than 50% of your take-home pay should go toward your Essential Expenses, which include housing, transportation, groceries and utilities.
- At least 20% of your take-home pay should go to Financial Priorities, which include retirement contributions, savings contributions and debt payments. (Plus, if your employer offers a retirement plan, such as a 401(k) or a 403(b), you should be be contributing additional money toward retirement before your paycheck hits your bank account.)
- Lastly, no more than 30% of your take-home pay should go toward your Lifestyle Choices, which covers the fun you can have today: shopping, entertainment, personal care, the gym, gifts and more.
So, yes, you do deserve to have fun with your money today–just not at the expense of tomorrow. (Learn more about the 50/20/30 Rule.)
6. A big inheritance is coming my way someday.
This is a case of counting chickens before they hatch. The inheritance you feel sure to collect could be devoured by medical bills, it could dwindle away in another financial crisis, or you could find the wealthy relative you expected to inherit from is living far longer than you expected. You may also end up needing that money to pay off debts or taxes. While it certainly would be nice if you inherit money and you could put all of it toward your retirement, thinking you can do so is not a plan; it’s a gamble.
It’s better to rely on yourself to fund your retirement and then to enjoy your inheritance as a bonus if you do indeed receive one.
7. I’ll be able to use the equity in my home to retire on.
This retirement lie raises two big questions: Where will you live in retirement? And what if the market is down when you want to sell?
Okay, we’ve got a third question: Remember the housing crisis a few years ago?