In retirement, my expenses will decrease, and I will not need as much income as I do now.

Five Misconceptions About Retirement

January 23, 2008

Myth: In retirement, my expenses will decrease, and I will not need as much income as I do now.

Reality: A common assumption people make is that their overall expenses will be lower in retirement than they are currently.  This notion is based on the fact that items such as education, childcare, and mortgage payments may already be funded.  While some current expenses will decrease or disappear altogether, a whole new layer of expenses can appear as we enter retirement such as increased health care costs and funds spent on travel and leisure.

Additionally, it is important to have realistic expectations as to the role that Social Security will play in terms of your retirement income needs.  For most people, Social Security is more of a safety-net program than a primary source of retirement income.  The younger generation of today’s workforce may have little or no income assistance in retirement from the Social Security system.  For this reason, it is important to be proactive in saving for retirement through employer-sponsored retirement plans and other tax-advantaged vehicles outside of the Social Security system.

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