Five Discouraging Retirement Myths Busted

Here's some good news to get you excited about saving for retirement.

Retirement planning can feel daunting. When you hear how many people aren’t prepared, or how much you may need, it can be discouraging. That discouragement keeps many people from getting started. 

You’ve probably heard things like “You need at least a million dollars.” or “You should have 12 times your current income.” The reality is that everyone’s financial situation is different. The amount you need to retire might be more or less than what the experts suggest. 

Retirement isn’t as far out of reach as a lot of people believe. Whether you are 55 or 21, you can do things right now that will add up to big benefits later. 

Now let's dispel some discouraging myths about retirement.

Myth 1: Social Security will disappear before I retire

A lot of people are talking about when exactly Social Security will run out of cash. Believe it or not, if we do not change the way social security is funded today, the answer is never. But there are problems. A large portion of the population is retiring. And people are living longer in retirement. As a result, Social Security is paying out more than it takes in. Experts predict Social Security’s excess savings will run out by 2034. Once that happens, the amount Social Security pays out will need to be reduced or the program will need to be reformed. But as long as people are paying Social Security taxes, there will be money to payout benefits. 

Myth 2: I need at least a million dollars to retire

The average American can retire on a lot less than a million dollars and still enjoy a lifestyle similar to the one they currently enjoy. What do we mean by the average American?

The average age of retirement is 63.1
The average lifespan is 78.69 years.2
The median household income is about $59,039.3
Social Security pays an average benefit of $16,956 per year.4

Many financial experts say that most people will need about 80% of their annual pre-retirement income to retire comfortably. Using the numbers above and factoring in Social Security, that leaves the average American today on the hook for $475,018 to cover expenses for the rest of their lives.

This calculation doesn’t take into account any interest you might earn on your savings or any taxes you might pay. Inflation and other factors will likely drive this cost higher in the future. But, what this example illustrates is that you don’t need to be a millionaire to retire – although it sure wouldn’t hurt.

Myth 3: I need to save for my children’s college before thinking about retirement

Sacrificing your retirement savings for your children’s education may sound noble, but it doesn’t make financial sense for you or them. If you can’t cover your living expenses in retirement, you may be leaving your adult children to pick up the check. You don’t know for sure if all your children will go to college or graduate. Money in a qualified retirement savings account such as a 401k or IRA doesn’t count against you when applying for federal financial aid. You can also withdraw money from an IRA retirement account penalty free to pay for college tuition. So fund your retirement accounts first, and your college savings accounts second.

Myth 4: It’s too late for me to start saving

No, it’s not. Maybe you put off saving for too long or perhaps you had a major medical issue. This can leave you feeling discouraged. But there’s still time. You’ll have to cut back on expenses, save more and take advantage of any employer matches or tax benefits you can get. Start by making a plan. Decide when you want to retire and how much or how little you can afford to live on each year. Then take full advantage of any employer 401k match or retirement plan tax benefits you can get.    

Myth 5: Outliving your savings should be your biggest concern

A lot of retirement researchers predict doom and gloom for about half of Americans. But new research suggests that people’s fears about running out of money actually cause them to spend more conservatively in retirement.5 This can make even modest savings last years longer than many calculations suggest. This research confirms what many of us already know, people tend to get more frugal as they age.

Start making your retirement plan today. We’re here to help. 

We hope this positive take will help inspire you to start saving or to take a fresh look at your retirement goals. With the right plan and a little discipline, you can help make sure your best years are yet to come.

Pinnacle Bank provides facts about retirement accounts, an investment goal calculator, and can connect you with knowledgeable experts to help you take the next step.  Visit our Individual Retirement Account page to learn more.


1 U.S. Census Bureau, 2015.
2 National Center for Health Statistics, 2017.
3 U.S. Census Bureau, 2016.
4 Benefit paid to retrieved workers, Social Security Administration Fact Sheet, 2018.
5 Employee Benefit Research Institute, 2018.