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   “Twinkies remain edible for decades”. Have you ever heard that misconception and accepted it as fact? Twinkies only have a shelf life of 45 days and generally remain on a store shelf for only 7 to 10 days. The dangers of holding misconceptions go beyond eating an ‘old’ Twinkie. Many commonly-held misconceptions about retirement planning can make it challenging to make decisions that could forever affect your success and comfort looking toward and into retirement.

Let’s review some of the most significant of these misconceptions to see if we can bust them.

#1 I’ll Pay Less Taxes in Retirement

   This myth is not always true. You may earn less in retirement, which could reduce overall taxes, but some retirees may end up losing out on tax breaks enjoyed while they were employed. Did you know that taxes are calculated nine different ways in retirement? For example, when Social Security income is present, there can be additional taxes to pay simply because Social Security is part of your income. Although it is impossible to predict precisely where tax legislation will lead by the time we retire, it is possible to make decisions now to better position you and your family for taxes in retirement.

#2 Blanket Advice is Good Advice

    Imagine seeing a news headline on WMUR that a local family physician has been involved in a terrible malpractice scandal. As you read more, you learn that this trusted doctor is being investigated for malpractice for prescribing the same medication to all his patients. As more info comes to light, you learn that regardless of a patient’s symptoms, health history, or even age, they were prescribed the same medication leading to permanent side effects and reactions, even resulting in three deaths. What would you think about the advice that doctor gave? There’s no way that the same prescription would work for everyone.

    There is no one-size-fits-all approach. No TV personality or journalist knows your personal situation. It’s the very same with creating retirement plans. Your income needs may be similar to another’s, but your goals may be vastly different. Likewise, your retirement goals may be similar to another’s, but your income needs incomparable. What you need versus what your friend needs are likely very different things.

    This point emphasized the value of having a plan that takes into account factors unique to you and your situation. Don’t assume or accept that blanket advice will work for you. A fiduciary retirement advisor not only will, but must help you determine what’s right for you and, conversely, what isn’t.

#3 I’ll Need Less in Retirement

   “I’ve heard that I only need 80% of my current income when I retire.” Is this true? Well, the 80% rule should be considered blanket advice (see the previous point). I can tell you that while we tend to spend less in the later phases of retirement, it’s common for many to continue very similar spending habits during the first several years after retiring, often for even as long as a decade. 

   To plan to have sufficient income in retirement, it’s essential to review current expenses and what may change when retired. The importance of getting your income needs dialed in is why understanding income needs is a core component in the earliest stages of our retirement planning process.

   The next installment of this article will detail the remaining three retirement planning myths you must learn about, including “Annuities–Misconceptions vs. Reality.” To sign up for an alert when part two of this article is released, text or email “alert” to 603-729-3044 or mcole@theivyag.com and we’ll make sure you don’t miss out.

If you’d like to have a conversation on getting your own retirement plan started now, please click to request a complimentary consultation.