Retirement planning, to say the least, can be intimidating for most. What is the magic number you will need in your savings account to be ready to retire? Everyone wants to know, but many don’t know where to begin.
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Experts say that isn’t a good enough excuse for putting it off until “later.”
“Although retirement may seem far off for many, there are retirement concepts everyone should know to ensure you’re able to fulfill the goals you have for yourself and your family,” said Ken Hevert, senior vice president of retirement products at Fidelity.
And according to a new Retirement IQ Survey conducted by Fidelity Investments, there are a number of myths and misconceptions shared by many Baby Boomers who are now either beginning or approaching the Golden Years.
Hevert discussed with FOX Business some of the biggest retirement misunderstandings Baby Boomers have today, and how to boost your Retirement IQ.
Be a Budget Hawk
The study found that more than one in 10 Boomers felt they could withdraw 10 to 12 percent of their income annually—a rate that could drain savings in less than a decade, according to Fidelity. As a rule of thumb, Hevert advised, withdraw no more than 4-5 percent from your savings in the first year of retirement to make your savings last, and give yourself an annual fiscal checkup when you adjust for inflation every year.
Don’t Underestimate Health-Care Costs
Perhaps because of increasing health-care costs and greater longevity, Boomers have shown more concern about expenses that are difficult to forecast. When asked what the single largest expense is for most people in retirement, more than eight in 10 cited health care—despite the fact that housing can make up nearly half of their expenses. By planning ahead and staying financially educated, Hevert said Boomers can build in wiggle room for unpredictable expenses.
It’s a Marathon
When asked how often the market has had a positive return over the past 35 years, only 14 percent of Boomers were able to answer correctly. Remember: a solid investment strategy shouldn’t be focused on short-term market volatility, but should take into consideration the potential for growth over the long haul, said Hevert.