Many people spend years socking money away for retirement. And the more savings you manage to accumulate, the more financially secure your senior years might be.
But it's not enough to just save for retirement. It's also important to dig deeply into what being retired means. And part of that is cutting through some of the misinformation that's out there in the context of retirement. Here are three major myths that could hurt you in a pretty big way.
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1. Your living expenses will magically shrink
Many people are wired to believe that once they retire, their living costs will shrink to a notable degree. But there may really only be two expenses of yours that decrease notably once you retire -- commuting costs and retirement plan contributions.
Furthermore, some of your other expenses might rise once you stop working. You may find that you're paying a lot more for entertainment because you need a way to stay busy. And your utility bills might increase once you start spending a lot more time at home.
Pad your savings so you're able to cover all of your costs. And file for Social Security strategically to get the most out of those benefits.
2. Medicare will make health coverage nice and affordable
You might assume that you won't spend a lot of money on healthcare in retirement because you'll have Medicare coverage to fall back on. But while you may be eligible for Medicare in retirement, that doesn't mean your healthcare costs will be negligible.
Quite the contrary -- there's a monthly premium you'll have to pay simply to get access to coverage under Parts B and D. And if you opt for Medicare Advantage as an alternative, you might pay an added premium there, too.
Plus, there are costs you might encounter as a Medicare enrollee having nothing to do with premiums. With Part A, for example, seniors this year are looking at a $1,632 deductible per hospital stay. Ouch.
To avoid financial stress in retirement, aim to go in with enough savings to cover not just your everyday bills, but medical expenses that might arise. It's also a good idea to fund a health savings account during your working years and carry that balance with you into retirement so you have dedicated funds for your medical costs.
3. It's silly to hold down a job when you're supposed to be done with work
Many people think of retirement as a period where work should be off the table. After all, you put in decades in the labor force. Don't you deserve a break?
But the reality is that many seniors opt to hold down a job in some capacity during retirement because the need for money exists. And even if that doesn't end up being the case for you, you may decide to take on some sort of job because you're bored and need options for structuring and filling your days.
As such, be open to the idea of working in retirement. You may even want to team up with a family member or friend to start a business as a way of keeping busy.
Saving money consistently for retirement is an important thing to do for your future. But it's equally important to get to the bottom of these and other retirement myths so you can approach that period of life knowing what to expect.
