When it comes to financially planning for your future, you want to make sure you have all the information you need to make the best decisions possible. Unfortunately, there is a great deal of misinformation surrounding retirement finances—and believing these myths can leave you confused and unprepared to handle life’s challenges.
So, let’s examine some of the most common and dangerous myths about retirement finances. We’ll figure out what’s true, what’s not and what information you can count on moving forward.
Myth No. 1: “Medicare will cover all of my health needs”
It is true that a Medicare plan will cover a lot of your health needs, but it absolutely doesn’t cover all of them. First of all, it depends on what level of Medicare coverage you have: there’s Part A (hospital and short-term skilled nursing coverage), Part B (physician coverage) and Part D (drug coverage). There’s also an option for a Medicare Advantage Plan, referred to as Part C. And just like other health insurance, your coverage depends on your plan. It is important to note that Medicare does not cover long-term care services such as custodial skilled nursing care, assisted living or memory care facilities, nor does it cover in-home caregivers. Since 70 percent of the population over the age of 65 will need some form of long-term care, you will want to plan for how you will pay these services, should you need them.
Myth No. 2: “Social Security will be there for me”
Social Security is intended to supplement your retirement income, but will almost certainly not be your main source of “income.” The average monthly benefit for those receiving Social Security in December 2015 was only $1,228—which equals just under $15,000 a year. While Social Security may help take some of the burden off of your retirement, it is not something you should count on to exclusively fund your lifestyle.
Myth No. 3: “I won’t need to spend as much as I age”
This myth obviously depends on the individual, but many older adults find themselves spending more as they age, as opposed to the opposite. You may find yourself facing more expensive medical bills, needing costly long-term care or undertaking a remodeling project to make your home safer and more efficient to your changing needs. Planning for your retirement, just as with anything else in our lives, means planning (and budgeting) for the unexpected.
Myth No. 4: “My long-term care insurance policy will cover any unexpected health needs”
Long-term care insurance is a great option for supplementing many of the services Medicare doesn’t cover—like skilled nursing care, assisted living or memory care or in-home caregivers—should you choose to age in place. However, your long-term care insurance benefits depend on your coverage and may have waiting periods and benefits maximums. Another option to cover your long-term care needs is a continuing care at home plan, which may be used in lieu of, or as a complement to, a long-term care insurance policy.
Myth No. 5: “My financial adviser knows what I need”
It’s great to have a financial adviser you can trust, but you should still plan to take an active role in your finances throughout your retirement. Do your research, plan for the unexpected and make careful, educated decisions about your future. When working with professionals, work with someone experienced in helping older adults successfully age in place.
Now that these myths are officially “busted,” you can get back to enjoying your retirement—armed with the knowledge you need to plan for your long-term care needs while remaining financially secure.