Retirement is an exciting and challenging concept to think about, especially if it’s just around the corner.
All the hard work that’s gone into your career culminates with this new life phase. Retirement represents both your decades-long commitment to your line of work and years of planning for this long-awaited moment.
Regardless of where you are in this exciting life process, it’s important to be aware of some common misconceptions that can disjoint your financial path forward.
Unrealistic withdrawal amounts
You built up an impressive nest egg, but that’s no license to pull from it without limit.
Most financial planners agree that retirees should aim to withdraw about 4%, 5% or 6% each year. The recommended range is a far cry from the results of a recent survey, which showed people were withdrawing twice or three times the amount.
Careful and deliberate budgeting is essential to maximizing your retirement.
Miscalculating retirement resources
Another key finding in the survey led by Fidelity is that individuals generally undershoot when asked how much of a nest egg they will need to successfully retire.
The magic number is about 10 to 12 times of the retiree’s last full year of income. Only about a quarter of the respondents had the right idea about how much money they’ll need to save before making their grand exit from the full-time workforce.
Down market assumption
The pandemic’s far-reaching economic fallout spared very few, including those saving up for retirement. Retiring into an economic downturn is not what usually happens. Looking back, 26 out of the last 35 years occurred during strong economic environments.
Yet, many new retirees believe they have or will retire during down times — which is simply not the case as the statistics show. What’s important to remember is that each “down” year can be isolated from the following years. Your portfolio will not regress for an indefinite amount of time. The longer you save, the more likely you are to rise from any down time and come out well ahead.
Lack of assets
One of the biggest misconceptions recent retirees hold is that they do not have access to financial assets to move the needle on retirement life when it matters the most.
The reality is that retirement is complex and at times difficult depending on the circumstances. As a homeowner, however, you have a powerful asset in play. You can leverage this important financial asset through a home equity conversion mortgage.
Here’s how it works. If you are over age 62, then you have the capacity to enhance your financial resources as you plan for the future, which is fast arriving.
The conversion mortgage can eliminate monthly mortgage payments. As a result, you can boost your retirement income without having to move or sell. To learn more about how you can better navigate today’s financial realities as you plan and organize retirement life, please contact us to learn more about the benefits of a home equity conversion loan.
*(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; (2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; (3) the loan balance grows over time and interest is charged on the outstanding balance; (4) the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and (5) interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full repayment. This material is not from HUD or FHA and has not been approved by HUD or any government agency.