When it comes to retirement, people have some peculiar ideas, some of them just plain dangerous. Here’s what two recent surveys by Met Life and Employee Benefits Research Institute found.
A full 43% of those surveyed think they can withdraw at least 10% of their retirement savings each year. That might work if you plan to live just ten more years. But if your lifespan is 20 years or more, don’t withdraw more than 4% the first year, increased for inflation each year after that. Living on your savings simply won’t work for the average Joe, since the total savings for most Americans over 65 is less than $50,000.
Many people plan to cut spending in retirement, and 49% believe their income needs will be cut in half after they retire. Really? They plan to travel less, eat out less, see fewer doctors, and rent out half their home? In reality, with retirees living longer healthy lives, many people find they are spending more, especially on entertainment and travel to fill their time.
One smart solution is to die before the money runs out, and 60% believe that they have only a 25% chance of living beyond 85. The reality: Of married couples currently age 65, there is a 63% chance that at least one spouse will live to age 90
A pension could patch the gap in income, and 62% of those surveyed expected to live on pension benefits. That’s great – the problem is, only 41% of those workers or their spouses have a pension.
Long-term care is another sticky issue. When asked about costs for nursing-home or in-home care, 24% report having long-term-care insurance. But it turns out that only 18% were insured. And 38% mistakenly believe that long-term care is covered by health insurance, Medicare or disability insurance.
Many people thought that high income taxes kept them from saving more. But in reality, Americans with less than $100,000 of income have an effective income tax rate of 8%. Those with income over $100,000 of income pay somewhat more, but still have an effective rate of only 19%.
Working part-time in retirement can fill some gaps. The top three employers for U.S. citizens aged 65 and above are WalMart, McDonalds and Burger King.
How much of your retirement planning is based on wishful thinking? It’s time to take a realistic look at your retirement saving plans. If you don’t you may want to learn the skills needed to be a greeter or hamburger flipper.