Here are three Myths that could derail those well-thought-out plans:
Myth #1: You won’t need as much money when you’re retired.
Sure, you’ll likely have your debt paid off by the time you retire and you’ll probably have fewer bills, but there are other things that are going to cost you. What about maintenance on your house? It got older just like you did and you can rest assured that some repairs will be necessary.
It’s also true that you’ll have Medicare, but you’re still going to have to shell out for supplemental insurance or pay out of pocket for dental, vision, and hearing healthcare.
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Myth #2: Your income tax bill will be lower.
If you think you’re going to be in a lower tax bracket because you’ll be getting by on less income during retirement, well, think again. As covered above, you’re probably going to need the same income when you retire as you do now, and you’ll likely have fewer income tax deductions than in the past. For instance, if you pay off your mortgage, you can kiss that deduction goodbye. And remember, the money you withdraw from your 401(k) will be taxed, too.
Myth #3: You’ll downsize to save money.
This is a good plan in theory, but it could backfire on you. Be wary of condos and “modern living” apartments with all the latest bells and whistles that wind up costing you more than the homestead you just sold in order to downsize.