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Busting Retirement Myths

When planning for retirement, you’ll probably hear a lot of advice and sift through a lot of information. While it’s good to be as prepared as possible and read everything you can, don’t let yourself be swayed by false information. There are plenty of retirement myths out there, so keep these tips in mind.

I Don’t Want Or Need To Retire

This sentiment is common among entrepreneurs, as they’ve built something from the ground up. Also, if you love your work, you might feel like you’ll always want to be involved in it. This might be true, but you never know how you’ll feel once you reach retirement age. Maybe you’ll want a break or take time to travel. Maybe you’ll have a decline in health that will limit your abilities to work on the same level. These reasons are why it’s important to fund your retirement in multiple ways, so you at least have the option to retire if life gets in the way of work sooner than you planned.

There Will Be Time To Save Once My Business Is Established

As you’re building your business, you’re spending all your time, energy, and money on the set-up phase. It’s easy to assume that you’ll have time to save for retirement once it’s established. However, this is risky and can end up costing you. Even if you only save a small amount each month, it could be very beneficial. If you start saving early, the interest accumulated adds up and could make a big financial difference when you retire. You also never know what’s going to happen in life. For instance, if you start saving early but get into an accident that prevents you from saving for a few years, those early savings will help compensate.

I’ll Always Have Social Security To Help Cover Living Expenses

In a perfect world, Social Security would cover your living expenses after retirement. Unfortunately, that’s not the case. According to the Social Security Administration, Americans aged 65 and older only get 36% of their total income from Social Security, while the rest comes from IRAs, annuities, 401(K)s, employment, permanent life insurance, pensions, and savings. Therefore, it’s very important that you make a plan to have another type of income aside from Social Security. It’s also important to understand that Social Security is based on your lifetime earnings, which determines the amount of money you will receive each month during retirement. The age you start collecting Social Security also plays a factor. The longer you wait to collect, the more your benefits increase, which is another reason why it’s helpful to have a different form of retirement savings to keep you afloat.

I Will Still Make Money From My Business Even After I Retire

This is a great thought, and it does work for some people. However, there are a few important things to consider. First of all, who will take over your role in the business, and do you trust them to keep the business running profitably? Will you be able to support yourself in retirement and also pay your replacement with the earnings from your business? What happens if the business fails? Regardless of the answers to these questions, you should have a solid backup plan. That way, your business’s profits can be an added bonus on top of your retirement savings.

I Will Sell My Business And Fund My Retirement

A common plan among business owners is to sell their business for enough of a profit to fully fund their retirement. Unfortunately, the statistics are against you here. Only three percent of entrepreneurs plan to buy an existing business so finding a buyer can be difficult. If this is your plan, your risks include a changing market, the inability to find a buyer, employee losses, economic downturn, no suitable successor, and a myriad of other possibilities. You should know exactly what your business is worth, so you know how much additional savings you’ll need for retirement. You should also think about these factors when creating your retirement plan, so you can develop a diverse set of options.

My Medical Expenses Will Be Covered Through Medicare

Medicare only covers about 62 percent of basic healthcare expenses, yet many retirees believe it will cover all of it. Co-pays, non-covered premiums, vision, hearing, and dental are all out-of-pocket expenses that can rack up as much as $4,300 per person every year. Long-term care is another area of misconception. Two-thirds of Americans need long-term care at some point after the age of retirement. On average, a healthy 65-year-old couple needs $260,000 for healthcare and long-term care costs. If the couple is unhealthy, the costs increase dramatically.

I Don’t Need Life Insurance

Many people, especially those who are single, don’t feel that life insurance is an important part of their retirement plan. It’s easy to think you don’t need life insurance if your children are grown up and living stable lifestyles, or if your business is successful and your mortgage is paid off. However, life insurance can be a significant asset in retirement. During retirement, people often think about leaving money for their children and don’t live the way they want. They save their annuities and don’t dig into their retirement accounts in hopes of saving something for their families. However, if you use the death benefit on your life insurance policy, it can help you enjoy retirement and help your offspring in a more tax-efficient way. Talk to a financial expert about how life insurance can work for you as a dependable asset class.

Saving For Retirement Is Impossible Because My Assets Are All Used In My Business

This is one of the most common misconceptions among business owners when thinking about retirement. If you put all of your assets into one type of investment, like your business, you’re putting yourself at risk. It’s best to diversify your investments to make sure no matter what happens, you’ll have a plan when it’s time to retire. If you create a retirement account through your business, you could even receive a tax benefit because companies can deduct plan contributions.

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