If you fall in love with these two myths of retirement, you risk fighting during your golden age – Motley's Fool

The internet is full of tons of useful information on retirement planning. Unfortunately, it also contains misinformation that could hurt you. As a writer in personal finance, there are two common retirement myths that I hear or read often, and I am here to warn you. do not to be a victim of them. If you do, you risk condemning yourself to a money-strapped existence at a time in your life where you deserve better.

1. Social security can replace saving

Many people are inclined to believe that they will succeed in living on social security in retirement. In most cases, however, this is simply not feasible. Today, social security pays the average beneficiary only $ 1,461 per month. During a year, this represents $ 17,532. Meanwhile, the average retired household spends $ 46,000 a year. This is quite the disconnect.

If you are an average employee, you can usually expect social security to replace about 40% of your income before retirement. However, most seniors need about twice to enjoy life. Withdrawing from social security without saving could therefore lead to many years of stress and misery.

2. Your living expenses will drop dramatically

Many workers think that once they retire, their cost of living will be halved magically. But when you think of the expenses for which you are spending money while keeping a job, you realize that your expenses are not likely to change dramatically once you stop going to work every day.

For example, you will need a home during your retirement and, even if your mortgage is paid back at the end of your career, you will need to maintain your home, make repairs, pay insurance and pay property taxes. You will also need a means of transportation, food, heat, electricity and some type of communication (like a mobile phone). These expenses will not necessarily be different from your years of work at retirement. Although you probably spend less on fuel in the absence of a daily commute to work, retiring will not reduce your auto insurance or your monthly payments for your car.

And some of your living expenses might even increase at retirement. Take health care: With age, medical problems that could cost you money may occur and Medicare leaves participants responsible for a host of financial obligations (premiums, deductibles and co-insurance) , your expenses to climb well.

You could also end up spending more on hobbies because you will have more free hours during the day. Therefore, do not assume that your cost of living will decrease by 50% overall. Planning a reduction of 20% to 30% makes a lot more sense.

Save for your golden years

If all goes well, you are now at least somewhat convinced that social security will not be enough to keep you retired, and that your living expenses will remain robust. This means that you will need your own savings to avoid struggling financially later in life. The good news? You can save a lot of money if you fund a nest egg in a consistent way during your working years, as this table shows:

As you can see, the chart assumes that you are 30 years of retirement and that your investments generate an average annual return of 7%, which is actually a few percentage points below the stock market average. Plus, you do not need to part with an insane amount every month to save a lot of money.

For example, to maximize a 401 (k) at current rates, you would need a monthly contribution of almost $ 1,600 to almost $ 2,100, depending on your age (workers over 50 can contribute more than workers over youth). The figures above, however, represent a much lower monthly commitment.

Buying in the wrong information could destroy your shot at a safe retirement. Do not let this happen. Save for your golden years because your expenses will to be substantial, and social security will not cover them alone.