I read an article today on Kiplinger about the Three Dangerous Myths Of Retirement Planning. It aligns perfectly with what we teach in our 9-week FPU classes and in coaching clients individually. I’ll leave it to you to read the article on your own, but will address each myth and add our take on it:
Myth One – Retirement Planning Is Based On A Magic Set of Numbers: It actually is to some degree, but there are many variables, not hard and fast rules. Spend a little time with this stuff and you will hear “it depends” quite often! Market performance, your needs in retirement, how well-insured you are, how many years you expect to live – all those are variable numbers. Regarding the 4% withdrawal rule in particular, my personal goal is to have a buffer of cash equal to 3x our annual budget to use when the market is down. That way, we’re only drawing down 4% or 5% when the market is up and performing much better than that.
Myth Two – Long-Term Care Isn’t Important Now: Get LTC insurance when you turn 60 years old. Just do it. The likelihood of you needing it before then is extremely low, and by age 60 you should have no debt of any kind whatsoever, including your mortgage, and will be able to afford the payments. And according to the Department of Health and Human Services, 70% of Americans turning age 65 can expect to use some form of long-term care during their lives. With the cost of a semi-private room being over $82,000 a year, not having this insurance is a detriment to your financial plan.
Myth Three – Social Security Benefits Are Never Taxed: They sure can be. It depends (see, there’s that phrase again!) on how much other income (retirement of otherwise) you bring in.