Retirement Myths

annuity think tankYahoo finance takes on 5 retirement myths that I think is worth the read.

 

Myth No. 1: $1 million will guarantee a stable retirement.
Expert: Nicole Rutledge Regili, lead adviser with Orlando, Fla.’s Resource Consulting Group

 

Not necessarily!

 

First, $1 million today does not buy you what $1 million would buy you 20 years ago, thanks to inflation. Second, $1 million may or may not be your “number.”

 

That number is determined by many variables, but spending and portfolio returns are the most prominent.

 

Myth No. 2: Health care is your biggest expense in retirement
Expert: Chris DeGrace, vice president, SunTrust Investment Services

 

Health care certainly is a big cost, but the No. 1 expense is actually taxes.

 

Myth No. 3: Downsizing in retirement will save you money
Expert:
Caroline Delaney, executive vice president at San Jose, Calif.’s Hillis Financial Services

 

Many clients want to downsize, but their egos tend to get in the way. They think moving into a smaller home will cut back on their monthly outlay, but that tends not to be the case. They may move into a smaller home, yet the money they save in mortgage payments ends up going to remodeling the home or a new car payment. When giving up the space, make sure you are actually reaping the benefits.

 

Myth No. 4: You should pay off your home mortgage early
Expert: CPA, financial planner for Mackey McNeil and president of Bellevue, Ky.’s Mackey Advisors

 

It really depends.

 

If one makes additional principal payments to pay off the mortgage early, that is different from someone who takes $100,000 out of their portfolio and pays off the mortgage in one big chunk. It’s best to run the numbers for yourself and see what is best for you. Too often, taking a lump sum at retirement to reduce debt creates a very bad result. At a 40% tax rate, you have to take about $160,000 out of your portfolio to retire $100,000 in debt. This means that entire $160,000 is not earning money for you for the rest of your life.

 

Myth No. 5: Medicaid covers all of your health care expense
Expert: John Bucsek, managing director of MetLife Solutions Group in Cranford, N.J.

 

Medicaid covers only catastrophic illness, not all of your health costs — that’s why they have Medigap and other supplemental coverages for an additional cost.

 

 

 

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