It’s something that is delicate and can even get under many people’s skin, up to retirement age: Handling Money. The thing is, money can be a gift from our Emmanuel…if we use it in the ways He wants us to! Here are a few money lies that need to be stomped out now before things get tragic:
1. Debt collectors will stop chasing me once I’m in retirement, so why worry about it?
Think again. Even student loan debt can chase you into retirement.
The Treasury Department has been withholding as much as 15% of Social Security benefits from a rapidly growing number of retirees who have fallen behind on federal student loans — five times as many as in 2001. Even something as simple as credit card debt can hurt you in retirement, says John Ulzheimer, president of SmartCredit.com.
“When it comes to credit card debt, you absolutely have to get out of it before you hang up your company badge,” Ulzheimer says. “It’s very likely the most expensive debt you’re carrying at 13 percent to 15 percent interest on average, and twice that in some cases. No retirement nest egg can guarantee that kind of growth.”
2. I can definitely get by in retirement with less income than I’m making now.
Leaving the workforce might help you cut costs in some areas — for example, your pricey commute to the office — but you can never underestimate the cost of aging. “Many studies show that some retirees even spend more in retirement than they did when they were working,” says Susan Garland, editor of Kiplinger’s Retirement Report.
“In the early years, you may be embarking on long-delayed travel and hobbies. And as the years go by, your health care costs are sure to rise. House-related maintenance costs, insurance and property taxes are sure to be on the upswing as well.” A 65-year-old couple retiring in 2012 is estimated to need $240,000to cover medical expenses throughout retirement.
3. I can always save more by postponing retirement until my late 60s or early 70s.
“More and more Americans say they plan to pay for retirement by working longer, but in reality, many retirees end up quitting sooner than planned,” says Greg Burrows, senior vice president for retirement and investor services at The Principal. One third of American workers said they plan on working past age 65 in a recent survey by the Employee Benefit Research Institute, but more than 70 percent of retirees said they actually quit before that milestone.
4. I can always rely on Medicare for my long-term health care needs.
Medicare is an excellent resource for retirees needing health care support, but here’s a wake up call: It doesn’t cover all long-term care. Medicare coverage excludes extended nursing home stays, custodial care, or an in-home nurse to help out if you’re unable to dress, feed or bathe yourself.
5. I’ll never learn enough about investing to make a difference in my savings.
Contrary to popular belief, investing savvy isn’t something only the rich are born with. But if you want to invest wisely, do yourself a favor and leave the stock picking and day trading to the professionals. “Stick to the boring but effective strategy of saving early and often, watch investing fees, and picking an asset allocation plan where you can stay the course when the market inevitably takes a dive,” says Ning.
And start as early as possible. According to personal finance expert Kimberly Palmer, someone who begins investing at age 25 will only have to save $4,830 annually to reach $1 million by age 65, accounting for an annual return of 7 percent after fees. That figure triples to $15,240 if you wait until your 40s.