INDUSTRY INSIGHT
RETIREMENT
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How to Avoid Three Common Myths Standing in the Way of Retirement Security
Today, most of us expect to live longer, healthier and more active lives. How are you going to spend your time in retirement? Will you visit family? Travel? Volunteer?
The possibilities are endless but when you do decide, the next step is determining how your choices translate into dollars and cents. So ask yourself: can you afford the lifestyle you envision? Will you have dependents? What will my other expenses be?
These are just a few of the questions that need answering, but following through still does not guarantee a dream come true. There are 3 popular myths about retirement that you want to avoid falling prey to.
Myth # 1— Lower Expenses in Retirement
In the past, it’ s been suggested that a good target for retirement income was 50 % to 80 % of pre-retirement after-tax income. However, your mortgage might not decrease, your healthcare and insurance costs may increase and with more free time you may tend to spend more money, depending on your situation. In short, you can’ t just assume your retirement income needs will decrease during retirement. A good tactic is to base your planning on a range of scenarios.
Myth # 2— My Social Security and Pension will be Enough
Traditionally, income at retirement has come from three sources— government programs, employer-sponsored plans, and private savings. However, today private savings is becoming an increasingly more important part of the equation.
Social Security was never designed as an alternative to personal responsibility. And, the higher your pre-retirement income, the less you will receive from Social Security as a percentage of pre-retirement income. When it comes to employer-sponsored pension plans, the trend in recent years has been for employers to offer tax-advantaged retirement savings plans to employees instead of employer funded pensions. One difference is that while a pension plan is guaranteed, a retirement savings plans( 401( k) plans are the most popular) are subject to the ups and downs of the stock market. Another difference
is that retirement savings plans today are often funded largely with the employee’ s contributions.
If you fail to contribute or make poor investment choices, the benefits you receive from your retirement savings plans could turn out to be less than expected.
Myth # 3— I Know How Long My Money’ s Going to Last
Life expectancy is on the rise. You may end up being retired longer than you were in the workforce and this can make a big difference in how much you have to save while still working. Your life expectancy can make a big difference. For example, if you start with a retirement nest egg of $ 775,000 and earn 6 % on your money, you can expect to receive about $ 75,000 per year for 15 years before your money runs out. If you live 20 years in retirement, you will need to start with $ 915,255 instead of just $ 775,000, to stay in the money for the duration of life.
After dispelling these myths, you may want to recalculate the estimate of what it’ s going to take to finance the retirement lifestyle you envision. If you’ re like many people, you may encounter a gap between what you need and what you can expect to have. Your choices are pretty straightforward:
• Delay your retirement date.
• Reduce your retirement income goal.
• Increase your savings level.
• Increase the return on your investment.
A well thought-out retirement strategy can be flexible enough to incorporate these changes.
A financial professional can get you started and help you monitor your strategy over the years.
Neither Prudential Financial, its affiliates, nor its financial professionals, render tax or legal advice. Please consult with attorney, accountant, and / or tax advisor for advice concerning you particular circumstances.
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Megan Walsh Paull, RICP ®, LUTCF, FSCP ®, is a Financial Advisor with Prudential and is a member of Prudential’ s prestigious President’ s Council and Masters Council. She can provide assistance on a range of financial needs – from evaluating insurance needs to helping clients meet their financial goals. Megan has experience in building and maintaining close client relationships, founded on the basis of trust, respect, and integrity and she works tirelessly to help her clients achieve their goals.
No matter what stage of life you find yourself in, as a Prudential Financial Advisor, Megan can help you find solutions to your financial challenges. So whether you’ re“ Just Starting Out,”“ Settling into Retirement,” or somewhere in between, Megan would like to discuss your current financial situation, goals and challenges. She will help develop a strategy to help you find solutions to your financial challenges and meet your goals.
Provided courtesy of Prudential. Megan Walsh Paull offers investment advisory services through Pruco Securities, LLC( Pruco)( Member SIPC), doing business as Prudential Financial Planning Services( PFPS), pursuant to separate client agreement. Megan offers insurance and securities products and services as a registered representative of Pruco and an agent of issuing insurance companies.
0297581-00001-00
“ Preparing for retirement is always important, but the 5 years prior are crucial. It’ s important to start planning as early as possible.”
Megan Walsh Paull RICP ®, LUTCF, FSCP ®
Financial Advisor
The Prudential Insurance Company of America 1001 Ardmore Blvd, Pittsburgh, PA 15221
t. 412-600-6952 | f. 412-731-6046 megan. e. walsh @ prudential. com prudential. com / us / megan. e. walsh
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