Isn’t it what we all plan for? At some point in your life, you’ll stop working and enter “The Retirement Zone.” It will require income that may come from Social Security, retirement accounts, annuities, investments, or any number of sources. Yes, being a successful retiree requires planning. But you have to know what’s good planning and what are just myths. So, here are 8 retirement planning misconceptions you need to be aware of.


Myth #1—A Retirement Plan is Different from a Financial Plan

No matter what label you put on plans, they’re purpose is virtually the same—getting you through life and into a comfortable retirement. The important idea is that you have a roadmap to get you there.


Myth #2—Retirement Planning is All About your 401(k)

I’ve heard this response so many times over the past 30 years when I’ve asked people if they have a retirement plan, “Yes, I have a 401(k).

A 401(k) is not a retirement plan, it’s a savings tool. A 401(k) does not list your goals, your time horizon, your retirement budget for basic living, how much you need for healthcare costs, how much extra money you need to travel or pursue retirement dreams, etc.


Myth #3—A Retirement Plan is One-and-Done

Creating a retirement plan is not a one-time event. Things change–the economy, inflation, the stock market, real estate prices, and personal situations. A retirement plan needs to change with them. Review your retirement plan regularly and keep it up-to-date.


Myth #4—Online Retirement Calculators are Sufficient Retirement Planning

Retirement calculators are everywhere on the internet. They are helpful tools, but they are simple tools, often using hundreds of assumptions and averages. They don’t take into consideration life and economic changes mentioned in Myth #2. There is no way you are “average” in all aspects of a complete retirement picture.


Myth #5—Financial Decisions are Separate from Retirement Decisions

Money decisions are often broken into two camps—how it affects my life now and how they will affect my life in retirement. The reality is, every dollar you earn, save, and spend ultimately has an impact on your retirement years.


Myth #6—Retirement Savings Determines Retirement Success

While the amount you save is important, other decisions can be far more valuable to your retirement plan:

  • Delaying the start of Social Security can add hundreds of thousands of dollars to your retirement income.
  • The equity in your home can be tapped for additional income.
  • Reducing expenses in retirement can dramatically improve retirement cash flow.
  • Downsizing can put you in a newer home which will need less maintenance than an older home and may even add cash to your savings.
  • Accelerating debt payoffs can sometimes be a better use of money than saving into your 401(k).
  • Careful tax and retirement income planning can keep more money in your pocket.
  • Creating passive income, such as rental property, can be beneficial as long as you have the temperament to own rental property.
  • Working in retirement. Yes, it will add income to your retirement budget, but even more importantly, it may help keep you mentally and physically healthier.


Myth #7—There is One Right Way to Create a Retirement Plan

Creating a retirement plan can get confusing because there are so many rules of thumb and best practices. You have to ask yourself, “What’s right for me?” To achieve what you want to do, you may create a plan that breaks all the rules.


Myth #8—Medicare Will Cover My Healthcare Costs

Healthcare costs have become one of the biggest parts of any retirement budget. According to Fidelity, an average retired couple aged 65 in 2023, will need approximately $300,000, after tax, to cover healthcare expenses during retirement.

Somewhere along the line, it’s become a retirement myth that Medicare will cover most of a retiree’s healthcare costs. The truth is, Medicare will only pay for 80% of Medicare-approved expenses. The rest comes out of your pocket unless you have a Medicare Supplement policy. The Supplement pays the additional 20%, but you have to pay monthly premiums for the Supplement policy. And the Medicare/Supplement combination doesn’t pay for hearing, vision, dental, or prescription drug coverage. If you want those, you have to buy separate policies and pay the premiums for them.

Additionally, Medicare and Medicare Supplements do not pay for long-term care. That’s an additional consideration when creating a retirement plan.


This article is presented as information only and should not be considered tax, legal or financial advice.