Don't Be Fooled: 6 Common Retirement Misconceptions
Conventional wisdom can steer retirement savers wrong. So, don't just follow the standard financial advice: Challenge convention instead.


In an effort to keep things simple for people who are nervous about retirement — whether they are 42 or 62 — conventional planning strategies focus on how to save and invest money. If you save X amount and invest wisely, you will live happily for N years. That is how retirement misconceptions begin.
Saving is good but hard. Smart investing is good — and also quite difficult if the appropriate strategy is not employed.
Hoping for the best as you draw down that savings to meet your budget in retirement — while absorbing the ups and downs of the stock market, inflation, medical and caregiver expenses — virtually ensures that you will remain nervous about your financial health up to and through retirement.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The problems with conventional wisdom
Misconception No. 1: 401(k)/IRA plans offer retirement income. Vehicles such as 401(k) plans and IRAs are good ways to save because you can build tax-deferred savings. And if you simply follow the mandated required minimum distributions, you will have a retirement drawdown strategy. The problem: While you are required to take distributions out of these plans starting at age 70½ — whether or not you need the money — it is not a retirement income strategy in the true sense of income, since “income” consists of money received without any other financial effect. Withdrawals impact your total savings and, as such, are not truly income. P.S. You can’t avoid paying taxes, but you can minimize them, as I explain here.
Misconception No. 2: Retirement calculators are accurate. When you research a plan for retirement, you will find many versions of devices called retirement calculators. It’s OK to fill in the blanks and let them provide a number. The problem: Calculators might give you a rough idea of how much money you must accumulate, but they won’t address your personal situation or help you plan for guaranteed, lifetime income.
Misconception No. 3: Set your asset allocation and forget about it. Most people know that you should make sure the money in your 401(k) or IRA is diversified. Your savings shouldn’t be invested in just one type of asset class, like growth stocks, for example. The problem: What the advice doesn’t say is this: When you are about to retire, you need to reconsider your pre-retirement asset allocation and add other choices to the mix. The plan you developed when you were 35 won’t work at 65.
Misconception No. 4: All annuities are bad. That is what you will hear in a drumbeat of advertising and social media from advisers who have built businesses out of selling products based on the stock market and other returns. The problem: The headlines do not distinguish between different types of annuities. An income annuity, for example, is the only product that provides guaranteed lifetime income, similar to Social Security or a pension. So, for many people, it makes good sense to include an income annuity as part — but never 100% — of your portfolio.
Misconception No. 5: All reverse mortgage strategies are bad. As with annuities, an industry has grown to convince you never to utilize a reverse mortgage. The problem: Again, retirees should consider whether this option might provide benefits as part of a diversified retirement strategy. In moderation, and properly managed, a reverse mortgage can provide peace of mind in the form of tax-free cash flow and long-term liquidity for a retirement plan.
Misconception No. 6: Financial advisers consider all options. Your financial adviser has discussed asset allocation with you. How much of your money should be invested in stocks, bonds, mutual funds, ETFs, cash? The problem: Advisers don’t talk enough about product allocation. What do you do specifically with your major sources of savings — rollover IRA/401(k), personal savings, deferred annuities and equity in your house — to create retirement income? Each has its own tax and other considerations. Deciding how to use them most efficiently in your retirement income plan may be the greatest contributor to retirement income success.
The bottom line
Saving money is a simple but important concept. As you approach retirement, it is just as important to determine how much income your savings can provide. When you concentrate on the income power your savings has, your decisions will become easier.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.
-
I'm 65, with $1.2 million saved and a paid-off $1.3 million rental property. Should I sell, or keep it for income?
Should I be a landlord in retirement?
-
Do You Really Need That Wine Cellar?
Home Features Wine cellars are a popular feature in high-end houses. Will installing one in your home increase its value, or would you be better off with a cheaper solution?
-
Think a Repeal of the Estate Tax Wouldn't Affect You? Wrong
The wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term Care
Many people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Social Security Pop Quiz: Are You Among the 89% of Americans Who'd Fail?
Shockingly few people have any clue what their Social Security benefits could be. This financial adviser notes it's essential to understand that info and when it might be best to access your benefits.
-
Such Attractive Yields in High-Grade Munis Are Rare and May Not Last Long
According to this munis expert, the last time munis were this cheap was a brief period in 2023. If you kicked yourself for missing out then, you have a second chance now.
-
Financial Analyst Sees a Bright Present for Municipal Bond Investors
High-tax-bracket investors have an excellent opportunity to secure low-volatility, high-quality returns at yield levels rarely seen in over a decade.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance Agent
Your insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
Two Estate Planning Issues You Should Never Overlook
This estate planning attorney explains why proper asset titling and beneficiary designations make a big difference when it's time to transfer your wealth.
-
The Four D's That Could Force You to Sell Your Business
Business owners (or their heirs) can be rushed into a sale of their company if they haven't planned for a major change in circumstances — or the four D's.