A little while ago, we shared five big priorities you should work on as you are nearing retirement. We looked at retirement income planning, touched on considerations for your investments and sources of income, and even explained why giving your home some attention was a smart idea in the five years or so just before retirement.
However, we neglected to mention one to-do in that post that you also shouldn’t forget in your retirement plan: “don’t believe everything you hear about retiring.”
It’s true. There are tons of retirement myths floating around the internet and in your friends’ and loved ones’ imaginations that have the potential to ruin your “golden years.” Many of these relate to financial planning and money management both before and during retirement, but there are also some myths about general retirement living that also need to be “busted.”
Today’s post highlights four of the most significant retirement myths out there and offers some truthful insight so you can better prepare.
Myth #1: You should move to a “retirement-friendly” state to benefit from a lack of state income taxes.
Does anyone here enjoy paying taxes? Not many hands will likely go up for that question! With that in mind, you’re probably aware that there are nine states in the USA that still do not levy a personal income tax—including the warm and sunny popular retirement states of Florida and Texas.
Your friends are telling you it’s probably a good idea to pack your bags and head south as soon as you stop working because you’ll save boatloads of money. But, income taxes aren’t the only piece of the puzzle. These states tend to have higher sales taxes and property taxes in many areas to make up the revenue. Plus, the cost of living may also be significantly higher than what you’re used to.
Here in Pennsylvania, where all of our Explore Retirement Living-affiliated independent retirement communities are located, income is taxed by the Commonwealth. However, we’re still considered “retirement-friendly” when it comes to both the cost of living and taxes. As we reported in an earlier post, U.S. News gave Lancaster a 7/10 rating on value in 2019, due in large part to the affordability of real estate in the area.
Two other big affordability facts make PA—and the Lancaster County area—great for retirees:
- Pennsylvania remains one of the 37 states that does not collect tax on Social Security income.
- PA is one of only 12 states that does not tax pension income.
Myth #2: You can depend on monthly Social Security payments for a good portion of your retirement income, so it’s okay if you haven’t saved enough.
In short, the answer to this myth is, “yes and no.” So—a half-myth, perhaps? How does that work?
Well, it’s true that you can opt to begin receiving Social Security payments as early as age 62. Unfortunately, these payments are not nearly enough to live on—especially if you start taking payments “early” and the SSA docks a significant percentage from your potential full benefit amount each month. Note that taking benefits early means doing so before your so-called full retirement age, which differs based on the year you were born. (In 2020, full retirement age can be as high as 67 years for those born in 1960 or later.)
Additionally, it’s not outlandish to consider that placing your faith in a government-backed benefits program at this point in time may be wishful thinking. The Social Security Administration will have money to pay out benefits for the foreseeable future, though the SSA trust funds will be depleted in the early 2030s. No one is sure how benefits could be affected at that time, which is only a little over a decade away.
Myth #3: If you haven’t saved enough, you can always get a part-time job in retirement—or just work longer in your current job.
Related to the previous myth, you may not want to—or be able to—keep working in your current job. While Social Security offers extra benefits for those individuals who choose to put off retiring until age 70, this may simply not be practical for your lifestyle.
Sure, we are all living longer these days compared to many previous generations, but you also need to enjoy life, especially as you move into your sixth and seventh decades and beyond!
Of course, you may enjoy working, and having a part-time job in retirement may be fulfilling for you. However, it would be best if you treated that job as more of a hobby and not a significant source of income.
Myth #4: You’ll be able to spend less in retirement
This is a big one that we have already somewhat debunked in our previous points. Spending less in retirement may be possible some of the time—especially if you own your home and can remain there. But here’s the truth—things are only getting more expensive.
Even if you’ve planned well, your retirement savings may not stretch as far as it once seemed possible. This is especially true if you and/or your spouse run into health challenges and cannot remain in a family home that’s paid off.
While no one likes to think about the fact that they may require potentially expensive long-term care resources as they age, it’s something you must plan for. Of course, it’s not something you need to dread. In fact, it can be something you actually look forward to when you begin considering full-service, comprehensive care retirement communities.
Are You Ready to Retire? Explore Your Options in Lancaster County, PA!
Deciding if it’s the right time to retire can—and should—involve a lot of thoughtful planning. While you’re at it, you owe it to yourself to consider a move to Lancaster, PA. And if you’re already local, take a look at all the fantastic amenities and care resources that some of our best retirement communities have to offer.