A lot of people enter retirement having heard various colloquial “wisdoms” throughout the years, but not all of them are necessarily accurate. Understanding how these misconceptions may have a negative impact on your retirement expectations can help you know how to correct–or better yet, avoid–costly mistakes.

After all, you’ve worked hard to build a financial plan that can fulfill your retirement dreams, and you want to get the most from your savings. Have you accounted for all these myths and mistakes in your retirement plan?

Retirement Planning Myths

1. Health Care Costs Are Covered by Medicare

Myth: Medicare will cover all or most health care costs in retirement.

Reality: Studies have shown that a 65-year-old retiring in 2025 can expect to spend an average of $172,500 in health care and medical expenses throughout retirement, while a healthy 65-year-old couple retiring in 2026 may need about $418,000 in savings for health care, depending on coverage choices. These expenditures include Medicare premiums, deductibles and copayments for prescription drugs. On top of that, you may expect, on average, two years of long-term care, which could cost tens of thousands of dollars per year, with 2025 national median costs ranging from about $74,460 annually for assisted living to about $129,575 annually for a private nursing home room, depending on the type of care needed.

What to Do Instead: Build health care and long-term care costs into your retirement income plan, and review Medicare, supplemental coverage and long-term care planning options before you retire.

2. My Taxes Will Be Reduced in Retirement

Myth: Your tax bill will automatically go down once you stop working.

Reality: It is important to manage your total amount of adjusted gross income (AGI) while in retirement. Your AGI determines what tax bracket you are placed in, whether you will be required to pay taxes on your Social Security benefits and how much you’ll pay for Medicare premiums. With a lower AGI, you can keep a greater portion of your retirement income for yourself. In some cases, you may retain more money by having less income.

What to Do Instead: Coordinate withdrawals from taxable accounts, tax-deferred accounts and tax-free accounts so your income is managed as efficiently as possible.

3. Life Insurance Cash Benefits Will Not Add to My Retirement Fund

Myth: Life insurance is only useful for heirs after you pass away.

Reality: Did you know that your heirs will not receive any of the cash benefits accumulated in your life insurance policy? If your policy includes a cash value, you can use that cash in retirement. And you won’t owe any taxes if you take less than your accumulated premiums.

What to Do Instead: Review any permanent life insurance policies you own and understand whether the cash value could play a role in your broader retirement plan.

4. All Debt Is Bad Debt

Myth: Retirees should eliminate every type of debt as quickly as possible.

Reality: Common sense tells you that less debt means more available income in retirement. But debt isn’t necessarily bad. For example, your home mortgage may carry a much lower interest rate than credit cards or other types of debt.

That being said, if you’d like to lower your debt burden during retirement, downsizing your mortgage might be a good option. You can sell your current home and purchase a more affordable one using the equity from the sale towards the purchase. You’ll finance a smaller amount, which gives you more affordable monthly mortgage payments.

Another option is to finance most or all of your new home and invest the proceeds from the sale into other investment vehicles that have the potential to earn a higher rate of return than the rate you’ll pay on the new mortgage. Keep in mind that selling your home may come with tax obligations, so work with someone who understands your state and local tax circumstances.

What to Do Instead: Compare the interest rate, tax impact and cash-flow effect of each debt before deciding whether to pay it down, refinance it or keep it in place.

Retirement Planning Mistakes

1. Failing to Set Expectations with Loved Ones

Myth: Family support costs will be easy to handle once retirement begins.

Reality: Are you planning to put your children through college and maybe even help pay for your grandchildren’s education? Or maybe you intend to pay for weddings. How will inflation five years into your retirement impact these costs? Have you planned sufficiently for funeral expenses?

It’s important to review with your family what expectations they may have about your help with these emotion-driven expenses once you’re on a fixed income. Planning for a successful, enjoyable retirement means avoiding false expectations.

What to Do Instead: Have clear conversations with loved ones about what you can and cannot support financially and include those commitments in your retirement plan.

2. Saving Aggressively So You Can Retire Early

Myth: Saving aggressively is enough to make early retirement work.

Reality: When you think about early retirement, consider this: money x time = retirement. The longer you pay into your retirement fund, the more money you can expect to have when you’re ready to retire. Early retirement can cost you money in savings, but also in other retirement benefits. Some of these benefits include health insurance, reduced Social Security and pension dollars and even an increase in taxes. Early retirement may equal less dollars to spend in retirement years.

What to Do Instead: Before retiring early, stress-test your plan for fewer saving years, more spending years, health insurance costs and the impact of claiming Social Security earlier.

3. Assuming Too Much, Accounting for Too Little

Myth: Your expenses will fall enough in retirement to offset any new spending.

Reality: Think of all the daily and monthly expenses that will disappear as soon as you retire. No more costly commutes. There’s no need for a closet full of expensive suits and shoes since you aren’t dressing to impress anymore. The cost of lunches, coffee shop beverages, and gifts for coworkers are all gone. You’re not making contributions to a retirement account or a Health Savings Account.

Can these cost savings offset your new daily and monthly expenses? Probably not. You’ve got all day to spend money. You’ve got all the time in the world to take trips and attend events. Have you planned for your new, free-time expenses? If not, this may be the biggest financial planning mistake you make.

What to Do Instead: Create a retirement budget that includes both essentials and lifestyle spending, including travel, hobbies, events and inflation.

4. Hoping Social Security and a Pension Will Provide Enough Retirement Income

Myth: Social Security and a pension will provide enough income for a comfortable retirement.

Reality: We’ve already talked about underestimating expenses in retirement. Even if you’ve paid off your mortgage, vehicle loans and credit card debt, you cannot predict cost-of-living increases, escalating property taxes, home and car insurance costs or health care costs. Gas up your car today for $2.30 a gallon. A year from now, the cost could soar. And what about food, clothing and basic utilities?

Social Security income was always intended as a safety net, not a replacement for retirement savings. Your day-to-day retirement income savings will consist of Social Security benefits in part, but also pensions if you’ve earned them, any other investments and your savings. It’s recommended that your retirement income should equal 70—80% of your pre-retirement income for a comfortable retirement.

It may be important to review your retirement plan with a trusted financial advisor soon. You might find better ways to save smarter for your retirement.

What to Do Instead: Build a diversified retirement income plan that includes Social Security, pensions, savings, investments and a strategy for inflation.

5. Assuming the Stock Market Is Too Risky During Retirement

Myth: Retirees should avoid the stock market entirely.

Reality: When saving for retirement, the last thing you want is to lose any of your hard-earned dollars in risky investments. A basic understanding of how an investment portfolio can work for you may help alleviate your fears of stock market investments and ultimately lead to increased gains in your retirement portfolio.

First, an investment portfolio is built from a variety of income-bearing options: stocks, bonds and commodities. Your portfolio is built according to your tolerance for risk. When the stock market goes up and down, a balanced, diversified portfolio will likely adjust well to market fluctuations.

Your financial advisor does not invest your funds directly but does help guide you to make informed choices about how to better build your financial retirement fund.

What to Do Instead: Maintain a portfolio that reflects your risk tolerance, time horizon and income needs rather than abandoning growth investments altogether.

6. Forgetting that Social Security Benefits Can Be Taxed in Retirement

Myth: Social Security benefits are always tax-free.

Reality: Not everyone is suited to a life of leisure. Many adults, when faced with retirement, are afraid of leaving the workforce. The good news is that you can work as long as you like, are able or your employer allows. Working longer may increase your Social Security benefit. And, being around coworkers will keep you socially active and engaged. Your earnings may help you delay taking Social Security payments, which will increase by 8% a year up to age 70.

However, if you receive Social Security benefits, be mindful of the penalties you may pay up until full retirement age (FRA). Once you reach FRA, working won’t affect your Social Security benefits. However, if you claim your benefits before you reach your FRA, your earned income can lower your benefits.

On top of that, many people believe that their Social Security benefits are tax-exempt, but this simply isn’t the case for many retirees. In fact, the Social Security Administration projects that an annual average of about 56% of beneficiary families will owe federal income tax on their benefits from 2015 through 2050, and among those who owe income tax on benefits, the median percentage of benefits owed as income taxes is projected to be about 12% in 2025.

Whether your benefits will be taxed and what percent of your Social Security benefits are taxed depends on your provisional income. That’s why it’s important to make sure you understand all the pros and cons before adding post-retirement work income to your retirement savings plan.

What to Do Instead: Understand how provisional income works before claiming Social Security, taking withdrawals or adding part-time work income in retirement.

7. Trying to Tackle Retirement Planning on Your Own Because You Don’t Know Who to Trust

Myth: Retirement planning is something you should be able to handle alone.

Reality: The internet is a great place to gather information on almost any topic. When it comes down to emotion-driven subjects like your personal finances, you may find that information is often designed to scare you more than help you. Retirement planning should be based on your dreams, not your fears.

A professional financial advisor can help you plan for the retirement you want while accounting for most changes that life may bring. Planning for your retirement, armed with solid information, will help you decide when you can go it alone or when to get help.

What to Do Instead: Work with a trusted financial advisor who can help you evaluate your retirement income, tax exposure, investments, insurance needs and estate planning goals.

Building Trusted Relationships

A trusted financial advisor will help you set realistic goals and steer you away from the many factors that could negatively impact your retirement financial security. Your local Wealth Enhancement financial advisor will work with you to be in a better position to benefit from your retirement savings so you can begin to take a more objective look at what you can expect for your retirement.

Frequently Asked Questions About Retirement Planning Myths and Mistakes

1. Does Medicare cover all retirement health care costs?

No. Medicare can help cover many health care costs, but retirees may still be responsible for premiums, deductibles, copayments, prescription drug costs and long-term care expenses.

2. Will my taxes be lower in retirement?

Not always. Your taxes in retirement depend on your income sources, withdrawals, Social Security taxation, deductions and overall tax planning strategy.

3. Can Social Security be taxed?

Yes. Depending on your provisional income, a portion of your Social Security benefits may be subject to federal income tax.

4. Is the stock market too risky in retirement?

The stock market can be risky, but avoiding it entirely may create other risks, such as not keeping pace with inflation. A diversified portfolio aligned with your goals and risk tolerance may help balance growth and stability.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

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