Dispelling 5 common retirement myths

Senior couple speaking with financial advisor

Key Points

  • Financial myths have the potential to disrupt even the best-planned retirement.
  • Objective, fact-based information is critical for retirement planning.
  • Your Ameriprise advisor knows your situation and will help you stay on track to achieve your goals.

Here are insights to dispel five persistent myths about retirement. Your Ameriprise advisor will help you navigate with objective information and personalized advice that supports your goals.  

Myth #1: I don’t need to revisit my withdrawal rate

Planning how you will create a retirement income stream can be challenging. Historically, a rule of thumb has been that a properly diversified portfolio can last 30 years given withdrawals of 4% or less and increased annually to match the rate of inflation.1

Recent retirees and individuals nearing retirement should consider taking a close look at withdrawal rates with their advisor, if they haven’t already. The choppy markets  and prolonged low interest rates may impact returns in your investment portfolio. Tapping into investments — instead of a cash account — when assets are losing value is not ideal. This is because you need to withdraw a greater percentage of your portfolio to provide the income you want.  

If you are young or mid-career, planning for a 3% to 4% withdrawal rate may, in general, be a reasonable approach over the long term. Your advisor knows your situation best and will provide a personalized recommendation based on your goals and needs.

Myth #2: Medicare will cover all my health care costs

Medicare covers most doctor visits and hospitalization costs. However, there are health care expenses it does not cover, including routine dental care, eye exams and hearing aids.

Here are options that could help you pay for expected and unexpected expenses:

  • Medicare Supplement Insurance (Medigap) from a private issuer can help fund remaining copayments, coinsurance and deductibles, for example.
  • Medicare Advantage plans from private companies who contract with Medicare provide all of your Part A and B benefits, excluding hospice. Many plans offer prescription drug coverage.
  • A living benefits rider on a life insurance policy or annuity contract can enable you to advance part of the policy benefit to pay for expenses if you’re diagnosed with a life-threatening illness.
  • Hybrid policies that combine life insurance with long-term care benefits may help you pay for the costs of a nursing home, assisted living or in-home care — expenses Medicare does not cover. In general, these hybrid policies may be more affordable than traditional long-term care policies.

Your advisor will provide personalized advice for solutions that can help you prepare for health care expenses in retirement.

Myth #3: The Social Security program won’t last

The financial status of the Social Security program is an annual topic of conversation. The bottom line is that if you’re in or nearing retirement, Social Security solvency is not likely to materially affect you.

The Social Security Board of Trustees forecasts that financial reserves are able to pay full benefits until 2035, decreasing to 79% of benefits after that time.2 Potential changes to eligibility would address the shortfall, as revenue would continue to help fund the program. Changes to the program would likely be gradual and phased in over time. Ameriprise closely monitors new developments that may impact eligibility or benefits.

Social Security alone cannot provide enough income for most individuals. That is why 401(k) accounts and other savings vehicles are part of the retirement strategy your advisor may have recommended. However, if you are concerned about the uncertainty of Social Security retirement benefits, your advisor can help you build additional flexibility into your personalized retirement income plan. They can also recommend solutions for guaranteed income in retirement, if appropriate for your situation.

Myth #4: I can work as long as I need to

A significant number of workers end up retiring earlier than planned for a variety of reasons, including a disability or illness.

  • While 65 is the median age workers generally expect to retire, 70% of retirees report retiring earlier than that.3
  • More than one in four of today’s 20-year-olds will become disabled before age 67.4
  • Almost 70% of people over 65 will need long-term care at some point.5

For those reasons, it’s probably best not to rely on working as long as you may need. With your input, your advisor will develop a retirement strategy that's appropriate for your goals and helps protect your assets if the unexpected happens. 

Myth #5: I’ll spend less in retirement

At first glance it may seem logical that your expenses could be lower after you retire. But that assumption could be harmful over the long term. For example:

  • Overspending can occur. Given the free time to socialize and pursue interests, it can be easy to spend more than you planned. Retirement can last 20 to 30 years or more, so it’s important to keep your lifestyle spending at sustainable levels.
  • Inflation adds up. The cost of goods increases over time, and annual Social Security cost-of-living adjustments are not guaranteed. It may make sense to remain appropriately invested in stocks to grow your assets and stay ahead of inflation.

Your advisor can help develop an investment strategy and spending plan that supports your financial goals throughout retirement.

Check in with your advisor

Your Ameriprise financial advisor knows your financial situation best. They have access to objective information and can provide personalized advice to help ensure retirement income over the long term.


1 From an Ameriprise report for retirees, "Planning for a more confident retirement", published April 2019. A withdrawal rate below 4% shows a high likelihood that your money will last at least 30 years. As you increase your rate of withdrawal you increase the risk of depleting your assets during your lifetime. To dampen this risk, consider increasing your equity exposure and introducing guarantees into your lifestyle portfolio. It is for illustrative purposes only and does not consider the impact of any investment fees or expenses. It assumes the investment portfolio is rebalanced annually and any dividends are reinvested.

2 Summary: Actuarial Status of the Social Security Trust Funds, released April 2020. Social Security’s Long-Term Financial Outlook, 2020 Annual OASDI Trustees Report.

3 2020 Retirement Confidence Survey, Employee Benefit Research Institute, April 2020.

4 U.S. Social Security Administration, Social Security Fact Sheet 2021.

5 “How Much Care Will You Need?” LongTermCare.acl.gov, U.S. Department of Health and Human Services, October 15, 2020.