The 6 Biggest Lies Retired Couples Need to Stop Telling Themselves

Some of the most surprising retirement mistakes happen when retirees believe myths about their golden years. For example, many people think having Social Security will be enough to pay for their lifestyle or think they won't have to pay taxes once they stop working.

Believing these myths can create serious financial issues, so it's important to be aware of them. Here are six of the most common ones retired couples mistakenly believe.

Medicare will cover everything, including long-term care

Many people mistakenly believe that once they qualify for Medicare, they won't have to worry about surprise medical bills. Unfortunately, Medicare doesn't pay for long-term care like nursing homes or in-home care. These can be costly expenses that can quickly drain a couple's nest egg. 

The Medicare website encourages retirees to plan for non-medical long-term care. Couples can do this by creating an emergency fund and setting aside money each month to prepare for unexpected expenses.

Spending will naturally drop in retirement

Many people believe their spending will naturally be less in retirement, but this depends heavily on the couple. Data shows that spending can even go up when people are in their 60s and early 70s. Once retirees are in their mid-70s to early 80s, spending tends to decrease, but it rises again due to health care expenses once people turn 80.

Because of that, couples shouldn't assume that spending will drop once they retire. Plus, people will have varying circumstances. Some couples may be able to live with family members or their children to cut down on expenses, while others may need to move to different locations for more affordable housing.

Social Security will be enough income for retirement

Many couples believe they will be able to rely on Social Security in retirement, and because of that, they don't invest in retirement plans like 401(k)s or IRAs. However, the average Social Security check is just over $2,000, which may not be enough for a high quality of life. 

Most couples will not get equal Social Security checks, and if one spouse passes away, the surviving spouse does not get to receive both checks. Rather, the surviving spouse can keep the larger of the two checks.

Annual Social Security cost-of-living raises are guaranteed

Another myth many retired couples believe is that they'll always get an annual cost-of-living raise for their Social Security benefits. However, these cost-of-living raises aren't guaranteed. In fact, it's based on inflation. If there is a year with no documented inflation, there will be no COLA increase. This happened most recently in 2016.

The 4% rule means your retirement money can't run out

Many retirees mistakenly believe that following the 4% rule means their nest egg won't run out. The 4% rule, popularized by William Bengen, says that retirement savings can last approximately 30 years if retirees withdraw 4% of their first year of retirement and then adjust for inflation each year after that.

Though many financial planners recommend this strategy, it's not guaranteed and represents a specific type of portfolio. Retirees may need to design their own retirement plan that fits their lifestyle, income needs, and tax strategy.

Taxes disappear once the paychecks stop

Some retirees believe that they'll have a smaller tax bill than they did when they were working, but that's not always the case. Withdrawing money from traditional 401(k)s is still taxable. Social Security benefits and pension income can be taxable too. 

How much tax retirees owe depends on many factors, like a couple's total income, how much you withdraw, and even where you live in retirement.

Couples can run the numbers together ahead of time

Ideally, couples can work together to run these numbers ahead of time. Couples can decide the best retirement age, when to take Social Security, and the best withdrawal strategy for them. Though it's not pleasant to talk about, deciding how to optimize Social Security if one spouse lives longer is another important conversation to have.

Ultimately, if a couple is unsure of the best route to take, a financial planner can help provide a second opinion. Also, taking the time to practice living on a fixed income and a budget before retirement is another good way to prepare for the shift from living on a salary to living on retirement withdrawals.

Bottom line

Believing some of the money myths mentioned above can make it challenging for people to reach their retirement goals. To preserve their nest egg, couples can work together to better understand their retirement expenses, create a budget, and make a withdrawal plan. 

If either spouse has questions about the best way to prepare for retirement or make their savings last, working with a financial planner can help.

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