Given the level of instability and uncertainties surrounding the current economic environment around the world, people must start thinking about what lies ahead and how financially independent they want to be when they reach retirement.
Financial security is not something people are unfamiliar with, it is widely discussed and debated topic among individuals all over the world. Despite such awareness, we believe that an average American is not saving enough for his or her retirement, the money they have may not last their longer than their own lives.
The purpose of this article is not to emphasis on what you are doing wrong, because there isn’t. The purpose here is to make sure you are familiar with the myths surrounding the financial security domain so that you can maintain a safe distance from ever falling into the trap.
Here are three widespread myths that prevent people from making the wrong decisions and ignore the important steps needed to secure their retirement and become financially independent.
Retirement is equal to less spending
We hate to be the mayor of bad news for you, but it is true, not just statistically but evidently. What would you prefer when you reach your retirement? Frolicking around the beach, spending a peaceful life with your children or maybe taking cooking classes somewhere in Europe, isn’t this what you would want for yourself? At least this what insurance companies show in the advertisements.
Let’s get real for a while. If you have nothing better to do all day, what would you do? Spend more money or less? Most people would agree on the fact, they will spend more. All the trips you want to take, will cost you money. You wouldn’t want to stop your social life and all the expenses would increase over time.
Then there is medical care, not to forget. We are assuming that you actually have a retirement plan. We haven’t even touched the part where you have to spend on long-term care or nursing homes. Do you know? that a 20-year retirement plan costs around $280,000, on an average. Some of you might consider staying at home, rather than spending so much.
The global inflation rate is also reach exceeding heights, making it more difficult to maintain your savings. It is crucial that you to make sure all your retirement plans are in order and meet your expected future demands.
You only need social security alone
This is perhaps the biggest lie you will ever be told that “Once you’ve qualified for social security, you’re all set.” The reason why we can see that the idea is a complete hoax is because most people don’t even pay close attention to their estimates of Social Security. They just assume Social Security is enough to live off retirement. This mentality prevents people from actually saving more which eventually leads to their own demise.
What most people don’t know is that Social Security is only designed to cover only 40% of your pre-retirement income. Majority of Americans are already making their living, paycheck to paycheck and its probably fair to assume, it would be a struggle when your income is cut down to 60%.
To reiterate the fact, this information is not meant to add salt to your wounds but the medical costs that lie ahead in your future will eat up 20% of your Social Security. Think about it and make intelligent decisions.
Stay away from debt
You might be having some second thoughts here, why would anyone want to be in debt? Just stay with us and we’ll walk you through.
There is no denying that at some point in life, everyone has to deal with debt. It can be in the form of a student loan, mortgages or car loan. What most people are not capable of is differentiating between short term goals and long-term goals.
If you are planning to buy a house, it is a long-term asset, right? So, that becomes an investment and the value of your property will increase over time. Your major concern should be buying your home sooner to manage your cash flow rather than having a debt.
Taking loans early can help you avoid hefty and increased payments in the future. You would have to return the money back but the property will also increase in value. This is called smart debt management.
When it comes to managing debts successfully, consult an expert accounting or financial advisor that will help you make the right decisions.