Two Popular Retirement Myths And How They Can Hurt Retirement Security
Using the shortcuts can reduce your financial security in retirement and make it harder for most people to have successful retirements. Yet, these traditions are widely-accepted and widely-used.
Two widespread myths concern when people retire and how much of their employment income they need to replace in retirement.
Actual experience differs from the traditional beliefs and many people's expectations, as demonstrated in the recent 'Guide to Retirement' from J.P. Morgan Asset Management.
Most pre-retired people think they'll retire at age 65 or beyond. Surveys indicate about 70% of Americans don't expect to retire before 65.
But the experience of retired Americans is very different. The median retirement age of current retirees is age 62, and only 28% retired at 65 or later.
Most of the reasons people retired earlier than originally intended were out of their control. Downsizing or other changes at employers accounted for 32% of early retirements, and another 13% retired early because they were offered an early retirement package or incentive.
Personal health issues led to 31% of early retirements, and health issues of a spouse or other family member caused an additional 13% of earlier-than-planned retirements.
Only 39% of current retirees left the workforce early than planned because they realized they could afford to, and another 19% retired before 65 because they wanted to do something else.
Most of those who continue to work after 65 do so because they want to. Staying active and involved was the reason 52% of older workers gave for staying in the labor force, while 38% said they enjoyed working.
Another widespread myth is the replacement ratio. That's the percentage of the final year's employment income a retiree needs to pay expenses in retirement.
A common retirement rule of thumb is that people should plan on a replacement ratio of 80%, meaning their retirement income should be 80% of their last year's income from working.
The data show the issue is more complicated than the rule of thumb. The lower one's final employment income, the greater the replacement ratio.
Someone who earned $30,000 or less before retiring needs a replacement ratio of 104%, according to the J.P. Morgan Asset Management study. The replacement ratio doesn't fall to 81% until the final working income was $80,000.
Someone with a final earned income of $200,000 has a replacement ratio of only 60%, according to the report.
It's important to recognize that these are only averages. Spending varies considerably from retiree to retiree, even when two retirees have similar earnings histories and savings.
It's important to determine the lifestyle you want in retirement and make a solid estimate of how much that will cost. Different people can want wildly different retirement lifestyles, and the cost can vary just as wildly.
Also, for many people the level of spending changes through retirement. Typically, spending is relatively high in the first years of retirement but steadily declines as people age.
It's important not to use rules of thumb, other people's experiences or similar guidelines in your retirement plans. Realize that every person's situation is different and that every plan needs flexibility for contingencies and changes.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fast Company
27 minutes ago
- Fast Company
Retail sales rise in July as shoppers rush to spend ahead of tariffs
Shoppers spent at a healthy pace in July, particularly at the nation's auto dealerships, even as President Donald Trump 's tariffs start to take a toll on jobs and lead to some price increases. But the figures also underscore anxiety among Americans: all the uncertainty around the expansive duties appears to be pushing them to step up their purchases of furniture and other items ahead of the expected price increases, analysts said. Retail sales rose a solid 0.5% last month from the previous month, and June spending was stronger than expected, according to the Commerce Department's report released Friday. June's retail sales were revised upward to 0.9% from the original 0.6% increase, the agency said. The pace in July matched economists' estimates. The increases followed two consecutive months of spending declines in April and May. Excluding auto sales, which have been volatile since Trump imposed tariffs on many foreign-made cares, retail sales rose 0.3% in July. Auto sales rose 1.6%. They appear to have returned roughly to normalized spending after a surge in March and April as Americans attempted to get ahead of Trump's 25% duty on imported cars and parts and then a slump after that, according to Samuel Tombs, chief U.S. Economist at Pantheon Macroeconomics. The data showed solid spending across various stores. Business at clothing stores and online retailers saw increases. Business at home furnishings and furniture stores had strong sales gains. However, at electronics stores, sales were down. And business at restaurants, the lone services component within the Census Bureau report and a barometer of discretionary spending, also fell, as shoppers eat at home to save money. A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.5% from the previous month. The figure feeds into the Bureau of Economic Analysis's consumption estimate and is sign that consumers are still spending on some discretionary items. Tuan Nguyen, an economist at RSM US, noted the difficulty of attributing the entire July gain to resilient American shoppers given so much uncertainty surrounding the economy and tariffs. A sizable portion of the gain likely came from rising prices of imported goods under the impact of tariffs, he said. Nguyen also noted he can't dismiss the possibility that consumers once again pulled forward their spending ahead of the August tariff deadline, taking advantage of Amazon Prime Day sales as well as competing sales from the likes of Walmart and Target. In fact, Nguyen noted the sharp rise in furniture sales, for example, appeared to indicate shoppers were trying to get ahead of the duties. 'There is nothing fundamentally wrong with American households that would suggest a spending recession given that shoppers are in a strong enough financial position to accelerate purchases,' he wrote. 'With so much noise in the data, the rest of the year promises to be a wild and bumpy ride.' Earlier this month, the Labor Department reported that U.S. hiring is slowing sharply as Trump's trade policies paralyze businesses and raise concerns about the outlook for the world's largest economy. U.S. employers added just 73,000 jobs last month, the Labor Department reported, well short of the 115,000 expected. Another government report, issued Tuesday, on U.S. inflation showed that inflation was unchanged in July as rising prices for some imported goods were offset by declining gas and grocery prices, leaving overall prices modestly higher than a year ago. Consumer prices rose 2.7% in July from a year earlier, the same as the previous month and up from a post-pandemic low of 2.3% in April. On a monthly basis, prices rose 0.2% in July, down from 0.3% the previous month, while core prices ticked up 0.3%, a bit faster than the 0.2% in June. The new numbers suggest that slowing rent increases and cheaper gas are offsetting some impacts of Trump's sweeping tariffs. Many businesses are also likely still absorbing much of the cost of the duties. The consumer price figures likely reflect some impact from the 10% universal tariff Trump imposed in April, as well as higher duties on countries such as China and Canada. But that may change. U.S. wholesale inflation soared unexpectedly last month, signaling that Trump's taxes are pushing costs up and that higher prices for consumers may be on the way. The Labor Department reported Thursday that its producer price index — which measures inflation before it hits consumers— rose 0.9% last month from June, biggest jump in more than three years. The report comes as major retailers like Walmart and Target are slated to report their fiscal second-quarter earnings reports starting next week. Analysts will study the reports to get insight into the state of consumer behavior. But they will also monitor how much stores are passing on the tariffs costs to shoppers. In May, Walmart, the nation's largest retailer, warned t hat it had increased prices on bananas imported from Costa Rica from 50 cents per pound to 54 cents, but it noted that a large sting for shoppers wouldn't start to appear until June and July. But a growing list of companies including Procter & Gamble, Cosmetics, Black & Decker and Ralph Lauren told investors in recent weeks that they plan to or have already raised prices. Some are trying to be selective and focusing on raising prices on just their premium products as a way to offset the higher costs from tariffs. Warby Parker, which has been shifting their sourcing away from China, told analysts last Thursday that it plans to keep its $95 option. But it's increasing prices on select lens types. It also wants to cater more to older shoppers who need more expensive progressive lens. Warby Parker said that progressives, trifocals and bifocals make up roughly 40% of all prescription units sold industrywide. But just 23% of Warby Parker's business now is made up of progressives, its highest priced offering and offer the highest profit margins. 'We were able to quickly roll out select strategic price increases that have benefited our growth,' Neil Blumenthal, co-chairman and co-founder and co-CEO of Warby Parker, told analysts last week.
Newsweek
28 minutes ago
- Newsweek
Trump-Putin Meeting: Alaska Minerals Update Issued by Russian Lawmaker
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A senior Russian lawmaker said Russian corporations could be interested in developing rare earth metals in Alaska just a few days before the face-to-face meeting between President Donald Trump and President Vladimir Putin in Alaska. Viktor Vodolatsky amplified reporting that U.S. officials had discussed economic incentives intended to encourage a Russian halt to the war in Ukraine, and suggested that "it would be interesting for our large companies and corporations" to work in Alaska. Newsweek reached out to the White House via email for comment. Why It Matters Trump and Putin are slated to meet in Anchorage, Alaska, on Friday. The high-stakes meeting comes three-and-a-half years into Russia's war with Ukraine, which Trump pledged to end on his first day back in office. Trump has warned that if Russia doesn't come to the table to end the fighting, it will face serious consequences, likely economic. In recent months, the Trump administration has lauded various peace agreements and negotiations during Trump's first six months. What To Know Vodolatsky, the first deputy chairman of the State Duma committee on CIS affairs, Eurasian integration and relations with compatriots, said in an interview with Russian news agency Tass that it "would be interesting for our large companies and corporations to work on the lands of Alaska, developing the natural resources that exist there, or jointly creating companies for the development and extraction of minerals with the Americans." Russian presidential aide Yury Ushakov said Trump and Putin would focus on options for achieving a long-term peaceful settlement of the Ukrainian crisis during their meeting in Anchorage. President Donald Trump speaks to reporters as he departs the White House on August 1, 2025. President Donald Trump speaks to reporters as he departs the White House on August 1, 2025. Getty Images The Daily Telegraph reported on Wednesday that Treasury Secretary Scott Bessent is exploring the economic trade-offs the United States can make with Russia in order to facilitate a ceasefire and peace agreement. These include giving Putin access to the rare earth minerals in the Ukrainian territories Moscow partially occupies, as well as opportunities to tap into the natural resources in the Bering Strait between Alaska and Russia's eastern coast. There has been no confirmation from the White House or Alaskan officials that such a proposal is on the table. What People Are Saying President Donald Trump told reporters on Thursday: "We're going to see what happens with our meeting. We have a big meeting. It's going to be very important for Russia and very important for us. And important to us since we're trying to save a lot of lives... As far as rare earth, that's very unimportant. I'm trying to save lives." What Happens Next The leaders are scheduled to meet in Anchorage today in a session that Russian officials described as focusing on a long-term settlement of the Ukrainian crisis and that U.S. officials described as a preliminary, "listening" meeting.
Yahoo
35 minutes ago
- Yahoo
Mike Rowe warns America has 7 million men in their prime who aren't working — and aren't looking either. Here's why
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. American TV host and philanthropist Mike Rowe believes there's a 'horror story' unfolding in the American labor market. 'The stat that sticks with me and worries me today is 7.2 million able-bodied men, today in their prime working years, are not only unemployed … [they're] officially not even looking,' he said in an interview with non-profit Moms For America. Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rowe did not provide a source for this statistic, but 3.3% of prime working-age men (ages 25 to 54) did not participate in the labor market in June 2025, according to the Bureau of Labor Statistics. This means that of the 65,162,760 working-age men in June, 3.3% or about 2.2 million men were unemployed. There is no information on whether they were 'able-bodied' or not. Rowe also pointed to the shortage of tradespeople in the U.S. and said the nation's labor force is 'wildly out of balance.' Here's why many men have abandoned the formal economy. Able-bodied men? Not really To understand why men in their prime were participating less, the Bipartisan Policy Center (BPC) conducted a survey in 2024. Fifty-seven percent of prime-age men not seeking work cited physical, mental or behavioral health reasons. Close to 30% said they are not working by choice, and 9% said they are busy caring for others. Put simply, men who are not employed and not looking for work may not be as 'able-bodied' or mentally fit as Rowe assumes. Solving the male participation crisis Since mental and physical health concerns are keeping many men out of the workforce, a better framework for supporting employees in the workplace could address some of the participation challenges. A majority of men (52%) not looking for work in the Bipartisan Policy Center survey said that better health insurance coverage from their employers would be an important factor for them to consider going back to work. Meanwhile, Rowe is trying to address the talent gap by compensating young Americans who try to gain new skills and enter sectors with severe talent shortages. His foundation, mikeroweWORKS, has given out nearly $12 million in scholarships to over 2,000 recipients across the country since 2008. Read more: Nervous about the stock market? Gain potential quarterly income through this $1B private real estate fund — even if you're not a millionaire. Another way to earn income For men who are suffering from disability, caring for children or elders full-time, or otherwise unable to fully participate in the job market, there are still avenues to earn passive income to support their lifestyle and save for retirement. Historically, one of the tried-and-true ways to build wealth and secure your retirement has been through real estate. However, not everyone has the money for a down payment on a home or wants to take on a 30-year mortgage. Being a landlord brings with it many of these same challenges, but with the added layer of midnight maintenance calls and tenant management. But now there are investment platforms that allow you to generate real estate income with a hands-off approach. For example, firms like First National Realty Partners allow you to invest in commercial real estate in a convenient and simple way by offering white-glove service to investors. FNRP is a private equity firm that gives accredited investors access to necessity-based commercial real estate without the hassle of being a landlord — and with the potential to passively collect distribution income. FNRP requires you to put in a minimum investment of $50,000, less than the down payment on a home in some cases, and be an accredited investor. From here, FNRP acts as the deal leader, providing expertise and doing the legwork, streamlining the process, while investors can use their secure platform to explore available deals, engage with experts and easily make an allocation. Investors with less capital can also get returns on real estate with just $100 by investing with Arrived. Arrived's easy-to-use platform offers SEC-qualified investments such as rental homes and vacation rentals that have paid out more than $12 million in dividends to 740,000+ registered investors. Arrived is backed by billionaire investors like Jeff Bezos, and their simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset class without taking on any of the responsibilities of a landlord. What to read next Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Here are 5 simple ways to grow rich with real estate if you don't want to play landlord. And you can even start with as little as $10 Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Solve the daily Crossword
