I'm not saying you shouldn't save for retirement and live prudently. But sometimes you just have to stand back, get some perspective, and ignore all the anxious advice you get about retirement, often from people trying to push a political agenda or sell you a financial product. Here are five ways people in the media try to scare retirees:
1. Social Security is going broke. Social Security is not going broke. The system has the resources to pay full benefits until the year 2033. That gives politicians 20 years to make some adjustments. But even if nothing changes, Social Security will be able to pay 75 percent of its obligations. Now, nobody wants to take a 25 percent pay cut. But that's not the same thing as going broke.
Also, consider that when our parents took their first Social Security check, circa 1980, the average monthly benefit for a retired worker was $321. Accounting for inflation, that $321 would be worth $895 in today's dollars. But the Social Security Administration says the average benefit for today's retired worker is $1,233. That's a lot better than what our parents got. Even if we had to take a 25 percent pay cut—which is not something I'm recommending—we'd be better off than our parents were.
2. You're not saving enough to retire. According to a recent LIMRA report, 49 percent of Americans aren't saving for retirement. But that figure includes people in their 20s, who certainly have higher priorities.
An Employee Benefit Research Institute survey found that 56 percent of baby boomers and generation Xers are saving enough for retirement, and 44 percent are not. But that still doesn't mean 44 percent of Americans are destined for a life of poverty in their old age. Many of the 44 percenters have built up some nest egg. Maybe they won’t have enough for their desired retirement lifestyle, but they probably will have enough (along with Social Security) to keep themselves out of poverty and stave off starvation, especially if they're willing to move to an area with a lower cost of living. Furthermore, it's younger gen Xers who are more likely to be behind on their savings than baby boomers. And those gen Xers—people in their 40s—have time to catch up.
3. Your medical bills will bankrupt you in retirement. Fidelity published a report saying the average 65-year-old couple will spend about $240,000 on health care. But that's an average, and your costs could be much higher if you go for plastic surgery and Botox injections or significantly lower if you use few medical services.
It's true that Medicare does not pay for all your medical expenses. That's why it's important to purchase a supplemental insurance plan—at a fraction of the cost of regular health insurance. You could also become incapacitated and be forced into a nursing home. Long-term care expenses can be astronomical. That's why you should consider long-term care insurance, especially if you have assets you want to protect and pass on to your children.
4. There's a war on seniors. If you read the news, you'll see that Ben Bernanke has allegedly declared war on seniors by keeping interest rates low. President Obama has supposedly declared war on seniors by raiding Medicare to pay for his health plan. A Romney economic adviser suggested deporting seniors in order to lower Social Security costs. (It was meant as a joke.) And the proposed Republican budget plan aims to balance the federal budget on the backs of the elderly—privatizing Medicare and getting rid of Social Security entirely.
But remember 2005? A re-elected President Bush went on a tear with his idea to replace a part of Social Security with individual retirement accounts. He got nowhere fast. Of course, seniors should be watchful of politicians trying to target retirees for major cuts in benefits. But the idea that there is an organized war on seniors is the product of politics and paranoia.
5. Don't kid yourself—you will not spend less in retirement. Maybe that's true if you have a bucket list that includes an extensive European vacation or shopping excursions to Rodeo Drive. But as a retiree with lower earned income and some investment income, you will pay lower taxes. And you are likely to pay either no Social Security tax or tax on only a portion of your benefit.
Your housing costs should go way down, especially if your mortgage is paid off. Your local government likely offers a senior discount on real-estate taxes. And you could downsize your family home to live in a smaller, less expensive place. Presumably you will not be supporting your kids. And don't forget: You will no longer have to set aside 5 to 10 percent of your income to save for retirement.
Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.