- Making assumptions now can lead to costly mistakes later.
- Medicare doesn't cover dental care or long-term insurance.
- Some retirees may spend more and pay more in taxes than during their working years.
Retirement is something many of us look forward to for decades. But as it draws closer, those feelings of excitement may be replaced by some unexpected anxiety.
How much will I spend each month? Will I be able to travel? Should I move?
Catching a case of the retirement jitters is common. In fact, a recent TIAA survey of soon-to-be retirees found only 43 percent felt extremely or very prepared for this big transition.
"I think they get nervous, it's a big decision, when to retire," said Amanda McCollum, a certified financial planner based in Jacksonville, Florida. "It's wise to be cautious at that time for that reason, you want to make sure you're prepared."
Part of being prepared means doing your research and not making any assumptions, including falling for these common retirement myths.
Some older Americans are surprised to learn Medicare parts A and B can leave them with gaping holes in their health coverage.
The basic version of this government-run insurance program pays for routine doctor visits and hospitalizations, but that's all. If you want prescription drug coverage you'll need to also buy what's known as Part D.
Dental care, hearing aids or long-term care insurance also are not covered by any form of Medicare, so for those services you're on your own and will need to buy additional insurance or reach into your nest egg.
These big-ticket items are partly why Fidelity estimates a typical 65-year-old couple retiring this year can expect to spend at least $275,000 on medical expenses during their retirement.
In addition to rising health-care costs, your changing lifestyle may also contribute to a higher rate of spending, even if the house is paid off and the kids are gone.
Most financial advisors say you need around 80 percent of your preretirement income to maintain your standard of living. However, if you plan on doing a lot of travel, or buying a second retirement home you may find your expenses actually go up.
You may no longer be earning a paycheck, but don't forget, money is still coming in the door in the form of pension payments or individual retirement account distributions, both of which are taxable.
"Many retirees end up paying the same or more in income taxes when they retire," said McCollum. She said in some cases a portion of your Social Security may also be subject to ordinary income taxes if you meet certain income requirements.
Plus, you may have lost some valuable tax breaks such as the mortgage interest deduction if you've recently paid off your home.
Keeping these myths in mind as you plan for your next step will help you plan and most importantly retire well.