by Christina Pomoni

Created on: August 02, 2011

Retirement changes your life drastically and hopefully for the better. Some people tend to think that retirement is all about money, but the truth of the matter is that retirement is a lifestyle, it is a choice of life and you choose a particular lifestyle for your golden years based on the decisions you make during the years of employment. However, as there are many retirement myths that are often misleading, many people tend to make the wrong decisions and therefore they are more likely to ruin their retirement, not only in terms of accumulated money, but mostly in terms of quality of life.

The following are the most common retirement planning myths.

Myth #1: It’s better to start saving for retirement at 40

Many people think that it’s better to start saving for retirement in their 40s, after they have bought their first house or sent their kids to college. The idea is that they feel safer to cover for these basic needs first and then start worrying about their retirement, which won’t happen sooner than the next 20 to 25 years.

However, the later you start saving for retirement, the most costly it can be for your retirement income. If you start saving in your 40s, you don’t allow your income to earn a lot of compound interest until retirement because the time horizon until maturity is significantly less than if you start saving in your 20s. In contrast, each dollar you save in your 20s earns more compound interest for a period of 40/45 years than it would earn for a period of 20/25 years. Moreover, you have to consider inflation and the increasing cost of life as years go by. Therefore, although retirement is not happening tomorrow, you have to start saving today to allow your retirement income to accumulate more compound interest and earn you a secure financial future.

Myth #2: Retiring early is the best option

Many people think that retiring early is the best option because it allows free time to enjoy hobbies, leisure and retirement income. Especially those workers who have been working more than 30 years, consider that retiring early can only be beneficial.

In spite of the great benefit of leading a stress-free life, retiring early is highly challenging as you are required to save more money for retirement in a shorted period of employment.

Retiring early has the following drawbacks:

* Retiring early allows less time to accumulate retirement income. This means that, while working, you will have to save more for your retirement.

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