Four Retirement Assumptions That Could Hurt You

There’s a lot of information out there about the “do’s and don’ts” of saving for retirement.  Most financial professionals would probably agree on some of the basics…for example, it’s important to start saving early and often.  However, with all the information available, it’s hard to know which advice to follow.  According to a recent article, some of the retirement planning assumptions floating around out there could actually hurt your portfolio and should be avoided.  Below are four potentially harmful assumptions that you should be aware of.

Social Security Is Enough

It used to be that a retired couple could live off of social security fairly comfortably, but unfortunately those days are gone.  Even if you delay retirement in order to collect your full social security benefits, it still may not be enough in comparison to the lifestyle you were accustomed to living during your working years.  Social security most likely won’t go away altogether.  However, its future is uncertain, and therefore, it shouldn’t be relied on 100% to cover all your living expenses.1

You Only Need Thirty Years of Savings

The general rule has long been that you should save enough money to live thirty years in retirement.  However, people are now living longer, often into their 90’s or even reaching 100 and older.  With the life expectancy getting longer, the thirty year rule is now on the conservative side.  According to Fidelity Investments, a couple may spend $245,000 on healthcare alone in retirement, not including the cost of an assisted living facility or in-home care.1

The 4% Rule Will Prevent You from Outliving Your Money

The 4% rule says that “…if you draw down 4% of your money each year in retirement, adjusting for inflation, you won’t outlive your nest egg.”  According to the article however, this rule is based on a lot of assumptions such as getting a decent return on your investments.  Therefore, you shouldn’t depend on this rule alone to get you through retirement.1

Your House is the Only Retirement Nest Egg You Need

Many people haven’t saved enough for retirement, and some haven’t saved anything at all.  Therefore, tapping into your home equity through a reverse mortgage is certainly one way to supplement your retirement income.  “After all, on average, Americans have more net worth in their homes than in financial assets, according to a recent report from the Boston College Center for Retirement Research (CRR).”2  However, having a single source of income in retirement is not ideal.  The best strategy is to have multiple sources of income and not to put all your eggs in one basket.1

Owning Stocks Is No Longer Necessary

Traditional wisdom says that the closer we get to retirement, the more conservative our investments should become.  This means taking money out of stocks and putting it into bonds, CDs and more conservative mutual funds.  According to the article, this is not the best strategy.  “Since retirement will last years, the money you have amassed has to grow at least at the rate of inflation but hopefully more.  Without stock exposure, particularly in a low interest rate environment, it is going to be hard for investors to see their money keep pace with inflation.  That, in turn, will devalue their money, giving them less purchasing power.”1

Regardless of your particular situation, it’s always a good idea to consult a trusted financial advisor regarding your financial goals and to make sure you’re on track.  If you are considering a reverse mortgage loan as a way to help supplement your retirement, and want to learn more, please use our Reverse Mortgage Calculator or call 800-218-1415.


1 4 Assumptions That Can Hurt Your Retirement –, by Donna Fuscaldo, 2/3/16,

2 How Retirees Can Make the Most of Their Home Equity –, by Steve Vernon, 2/10/16,

Author:  Meredith Manz