To help you plan for retirement as efficiently as possible, we’ve broken down a few misconceptions that tend to throw savers off track.

Misconception: As I near retirement, I shouldn’t be investing in anything with risk.

Reality: Retirement is the beginning of a new phase of life that could last decades. Removing yourself from markets could create the risk of inflation devaluing the dollars you’ve saved. Investing appropriately leading up to and throughout retirement can help your money keep pace with inflation over time.

Misconception: Medicare will take care of all my medical needs.

Reality: Medicare and retiree health coverage can be complex. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2020 may need approximately $295,000 saved (netted after taxes) to cover health care expenses in retirement.¹ This cost may be inclusive of premiums associated with Medicare coverage options and other out of pocket costs. Of course, personal factors will influence how much is needed for healthcare, but a great way to plan for medical expenses in retirement is to use a health savings account (HSA), if you’re eligible to contribute to one.  

Misconception: I should help my kids with college costs before I retire.

Reality: If you have the means to plan for your retirement and support education expenses, that’s ideal. However, choosing their education expenses over your retirement savings could set you up to fall short in retirement. Students have other options to pay for school.  

Misconception: I’ll live on less when I’m retired so I don’t need to save as much.

Reality: A general guideline is that you’ll need 70-80% of your pre-retirement annual income for each year of retirement, however, not working leaves more time for hobbies and travel, which can be costly. Likewise, spending may increase due to inflation and healthcare costs. The amount you need will vary based on personal factors, but the earlier you save the more time you give your money to accumulate. You should aim to save 11-15% of your income towards retirement while you’re working.

¹https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs