In today's financial climate, many adults focus on their short-term financial goals rather than the long-term goals, such as preparing for retirement. While many of those approaching retirement age have learned some truths about handling their nest eggs, there are younger people who are basing their decisions on myth. When it comes to saving for retirement, it is important to separate myth from fact:
Myth No. 1: You do not need to save much for retirement
One of the myths about retirement concerns how much money you will need. People tend to tell themselves that they won't need as much money in retirement as they do now - they see a future where their mortgage and loans are paid off and the kids are out of the house. However, life’s many financial detours and having more time on your hands during retirement can lead to spending that may increase your income needs. A good rule of thumb is to plan on needing 70 to 80 percent of your current income.
Myth No. 2: Your taxes will be lower in retirement, so you won’t need as much
While this can sometimes be true, without a mortgage payment or kids at home, you lose two of the biggest tax deductions. U.S. demographics and the future funding needs for Social Security, Medicare and Medicaid, may also result in higher tax rates. Additionally, up to 85% of Social Security income can be taxable. Combine these facts with the need for at least70 to 80 percent of your current income in retirement and this myth also falls away.
Myth No. 3: Your medical bills will be covered by Medicare
The biggest landmine when it comes to the family budget can be unexpected medical expenses. Retirees may be putting their financial eggs in the Medicare basket but Fidelity has reported that current retirees face an estimated $240,000 in out-of-pocket medical costs. Medicare also does not pay for long-term care past 100 days.
Myth No. 4: Investing in bonds is a sure bet
With the economic crash in 2008, many people saw the value of their retirement savings funds drop quite a bit. This led to a massive shift towards bonds as a perceived safer investment. However, bonds are not an ironclad investment either and bonds don't boast the same earnings potential that stocks do. Current low interest rates mean bond prices are high and the low interest amounts are killing that income strategy.
Myth No. 5: It’s already too late to start saving
When faced with starting to save, some people feel like they will never be able to put away enough money. Also, we tend to equate financial satisfaction with having a lot of money.
In reality, how satisfied you are with your money life is based on a personal interpretation of your financial circumstances. Two individuals can have identical financial situations yet their degree of financial satisfaction can be radically different. One person can feel wealthy with an income of $100,000 while another person will feel disillusioned and deprived at this same level.
The truth is that it is never too early or too late to start retirement planning. True, you may not be able to grow that nest egg to the heights you may have reached if you started in your 20s but making financial decisions aligned with your current goals can be powerful.
You can separate myth from fact by sitting down today with a retirement planning expert to get a real view of where you are and what you can do going forward.
 “Retiree health costs hold steady” FIDELITY VIEWPOINTS, 06/11/2014