When it comes to retirement, many people think that what was true for their parents and grandparents is still valid today.
You may have seen your grandfather retire at the age of 62, receive a pension and social security for about a dozen years, and you think this scenario is feasible for your own retirement. Or maybe your depression-time grandmother refused to give up her frugal ways, even though she had plenty of savings, and decided to live the rest of her life without ever enjoying a penny of what she saved and saved would have.
But retirees or retirees stuck in the past could make serious mistakes that could ultimately cost them long-term security.
Most people of earlier generations did not spend their retirement years participating in exotic river cruises or exploring remote locations around the world. And probably they did not live long enough to cause many medical expenses that threatened their thrifty lifestyle.
The reality of a digitally based society that has made individuals more committed to saving for retirement has also changed much of what used to be true. Pensions disappear. The long-term viability of social security is questionable. Health costs are expected to increase further.
"Do not just do something because your dad did it and your grandma did, take a look at the current state of things and make good decisions for the future," says Jeremy Shipp, founder of Retirement Capital Planners, a registered investment adviser in Glen Allen, Va.
So here are some retirement myths.
You should repay your mortgage before retiring.
The idea of a mortgage before retirement Repayments date back to the 1
Instead of accelerating mortgage payments, retirees – especially those who have interest rates Pay 4% or less – consider what else you can Do with this money, invest it and get a higher return. Retirees who pay higher interest rates, say around 6%, and who still have five to ten years on the mortgage, should consider refinancing a 30-year fixed rate mortgage to take advantage of the falling interest rate environment, he says.
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People who are approaching retirement may be reluctant to get a new 30-year mortgage Shipp says there can be benefits. For example, refinancing can reduce mortgage payments and provide retirees with better access to liquid assets that can be used for other expenses or investments. Taking inflation into account, the real cost of housing decreases over time. Even for retirees who want to move in a few years, the refinance can free up cash that they can use to move or do other things they want to do, he says.
Divorce Will not Impact Your Retirement
Most people believe that they do not divorce when they are 60 or 70 years old, but this does not apply to a growing number of people, says Haleh Moddasser, Senior Vice President and Senior Advisor at Chapel Hill, NC, office of the asset management company Stearns Financial Group.
People live longer and healthier, and with a longer life expectancy, a 10 to 15 year retirement has developed in 20 to 25 years. In view of this reality, she says, more people in unhappy marriages are considering their options.
"The Boomers are the first generation of people to divorce from a horror. Her parents and grandparents did not do that, "she says.
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Moddasser's concern is that many people – especially women – are too strong to have a certain level of combined wealth for financial security. Working closely with a number of elderly women who are considering leaving their husbands, she helps them understand their finances, for example by discussing the benefits of long-term care and, if possible, continuing to provide life insurance for the ex-spouse as necessary continue to work on financial aid.
Some women are afraid that they will not be able to work in the 60s and 70s, she says, but that, too, has changed because of technology. The Internet has allowed people to showcase their talents later in life, says Moddasser. "It offers them the opportunity not to go to pasture."
People spend less when they retire.
Many retirees do not have mortgage payments, commuting costs and expenses associated with running a business wardrobe. But when other expenses such as travel, additional leisure and healthcare are taken into account, people spend most of their time in retirement as well as during their work, says John Iammarino, president and founder of Securus Financial, a wealth management firm in San Diego.
He cites the example of a 60-year-old customer who plans to retire next year. She and her husband no longer have a mortgage, but the money they pay for it is used for medical expenses, says Iammarino. Once the woman retires, she will need to spend $ 1,200 a month on today's health care costs for the next five years until she is eligible for Medicare. In addition, she and her husband have to pay about $ 250 a month for the husband's Medicare. People live longer and have increased medical costs. If you add that up, the cost will be pretty high, he says.
Read Our Recent Cover Story : How Your Kids Can Ruin Your Retirement – And How To Ensure That This Is Not The Case For The Home And Gifts For Kids And Grandchildren. Retirement Capital Planners' Shipp says all of these things, and more, have the potential to feed more quickly with retiree's money than they had previously left the workforce.
Retirees have more time and the ease to buy things online. Not only are they being bombarded by digital advertising, but they can also get them to spend cash if they are not careful. "Small purchases a couple of times a week can add up pretty quickly," he says.