You Will NEVER Retire! (And Other Big Retirement Myths)

Will You Ever Be Able to Retire?
Will You Ever Be Able to Retire?

“You will never retire.” Those are four dreaded words no person wants to hear, especially those nearing retirement — even those who have not saved for retirement have hopes of retiring.

One in five people who are near retirement age have no money saved, according to a survey last year from the Federal Reserve. The survey results suggest that many U.S. households are not adequately prepared for retirement, with almost half of adults saying they were not actively thinking about financial planning or retirement at all.

Meanwhile, of those who have given at least some thought to retirement planning and plan to retire at some point in their lives, 25% said they didn’t know how they will cover their expenses when they’re no longer earning income from a career.

Even though the statistics seem daunting, there are still some things you can do to put yourself on the right track to get prepared for retirement, even if you are just a few years away.

Retirement Myth: It is All About Investment Returns

Growing rich with high growth stocks is a not only a retirement myth —  it is just a bad idea.

Finding a way to “get rich quick” is the Holy Grail when it comes to investing; many seek ways to accomplish this, though few are rarely successful.

While it’s easy to become seduced by investments that offer opportunities for fast, high-rate growth, saving for retirement is a marathon, not a sprint.

As you near retirement, you do not want to put assets you will need to live off of at risk.  Those assets should probably be invested in things that offer some kind of guaranteed return.  And your focus should be on saving more — either by working longer or cutting costs.

Retirement Myth: All Debt is Bad

Now that the worst of the housing market crash and the subsequent Recession appears to be in the past, real estate is once again offering prime opportunities for investors to get back into the market.

Many financial experts consider real estate debt to be good debt and real estate can be an interesting part of your retirement plan.

“Real estate is a resilient sector,” says says Dr. Dolf de Roos, president of Wealth Migrate, and author of the New York Times best seller Real Estate Riches. “When you look at houses from 20 years ago, they’re all still there. The longevity of housing is longer than that of, say, the stock market.”

Unlike buying into stocks, investors don’t need to have all their cash upfront when buying a house. For example, if you want to buy $100,000 worth of stock, you need to have $100,000 on hand to pay for them. However, when buying property, you can get a mortgage if you don’t have the funds to pay upfront.

“When you spend $100,000 on stocks, what is that worth? It’s worth $100,000,” says de Roos. “In the real estate market, if you use that same $100,000 cash to buy a property, you can buy a million-dollar property because you can get a mortgage.”

With real estate, you also have more control over your investment than you would in the stock market, says de Roos. Though you can’t control whether home prices in your area rise or fall, there are ways to create increase the value of your home without having to spend too much money.

“Sometimes just by painting the property can cause its value to go up,” says de Roos. “It is the realization that real estate does have benefits.”

A number of factors bode well for the real estate market and the progress it has made lately. The market has recovered by leaps and bounds since hitting rock bottom in the throes of the bubble bust. Nationally, home prices were 82% back to their normal pre-Recession levels at the end of 2014, according to a year-end analysis from national real estate database Trulia.

Furthermore, home prices continue to rise on average across the country, which could also spell out higher returns over the long-term on your invested property.

Ways to leverage real estate debt for retirement include:

  • Securing a reverse mortgage on your existing residence — eliminating your existing mortgage and tapping your home equity
  • Downsizing and buying a less expensive residence — either with cash from the sale of your previous home or with by using a reverse mortgage to purchase the new home
  • Renting out your home — in some cases rental income can cover your mortgage and rent on a residence that meets your needs
  • Buying a second home and securing rental income from that second property

Retirement Myth: It is Too Late to Save

Common sense would indicate that saving earlier for retirement better positions one’s self for retirement. That is undeniable.

But for the estimated 40% of adults ages 45 and over who had their retirement plans pushed back by the Great Recession, as noted by the Federal Reserve survey, it is not too late.

All of the most popular tax-favored retirement accounts — 401(k)s, IRAs, 403(b)s and 457(b)s — allow contributors who are 50 or older to make additional catch-up contributions. The IRS offers great tips on catch up savings and can help you learn more about how much you can contribute to catch up — it all depends on the type of plan you have.

And, if you work at a company, be sure to speak to your company’s benefits provider, CPA and investment professional about additional retirement benefits that may be available.

If you are contributing the maximum amount to your company sponsored retirement accounts, you can consider making Traditional IRA contributions or Roth IRA contributions. Depending on your income, you may not receive a deduction for these contributions, but the earnings are still tax-deferred or tax free.
Top Tips for Maxing Out Your Retirement Account,” will help you learn more about how to maximize your retirement savings.

Retirement Myth: I Will NEVER Retire

Many of us feel that we will never retire.  And while retirement is a big deal and very expensive, it is possible for almost all of us.

If you are behind on savings, the key to a successful retirement will be compromise.  Without savings, you still have many options for funding your retirement.

The big levers you have for funding retirement include:

However, the best way to make sure that you will retire is to develop a solid retirement plan.  The NewRetirement Online Retirement Calculator can help you do that by letting you experiment with different compromises and see what happens with your finances now and into the future.

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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