Common Money Myths That Trip Up Retirees

Medicare Part A and Part B cover hospital stays, doctor visits, and some preventive care, but they leave substantial gaps. Routine dental work, eyeglasses, hearing aids, and custodial long-term care (such as an assisted living facility or in-home aide for daily activities) are generally not covered. Prescription drug costs require a separate Part D plan, and premiums, deductibles, and copays under original Medicare can add up quickly.

Fidelity's annual estimate has consistently placed average healthcare spending for a retired couple in the hundreds of thousands of dollars over a 20-to-25-year retirement, even with Medicare in place. Planning for these out-of-pocket costs is one of the most overlooked parts of retirement budgeting. See how to rethink your retirement budget for a practical framework.

Holding mortgage debt feels uncomfortable, which is why early payoff is a common goal. But if your mortgage carries a relatively low interest rate, redirecting extra cash toward it means that money is not available for other purposes: an emergency fund, tax-advantaged retirement contributions, or investment accounts. Locking equity into a home also reduces liquidity, and accessing that equity later through a home equity loan or reverse mortgage carries its own costs and risks.

The right answer varies by individual. A licensed financial planner can help you weigh carrying costs against opportunity costs given your specific income, tax bracket, and timeline. This article is general information, not personalized financial advice.

The IRS uses a figure called 'combined income,' which adds your adjusted gross income, any nontaxable interest, and half of your Social Security benefits. If that total exceeds certain thresholds (currently $25,000 for single filers and $32,000 for married filing jointly), a portion of benefits becomes taxable. At higher income levels, up to 85% of benefits may be included in taxable income.

This is especially relevant for retirees drawing from taxable accounts, taking required minimum distributions from traditional IRAs, or receiving pension income alongside Social Security. Tax planning around withdrawal sequencing can matter here. Sequencing your income sources in the right order may reduce your overall tax burden over time.

Keeping all assets in cash or equivalents feels safe, but inflation steadily reduces what that money buys. At a 3% annual inflation rate, $50,000 in purchasing power today drops to roughly $27,700 in 20 years. Retirees who live into their 80s or 90s need their portfolios to maintain some growth to keep pace.

This does not mean taking on excessive risk. It means holding an asset mix that reflects both your time horizon and your spending needs. Most financial planning literature suggests retirees still benefit from some equity exposure, calibrated to their income sources and risk tolerance. How inflation erodes retirement income covers this concept in more depth. Past performance does not guarantee future results, and all investing involves risk. Consult a licensed financial adviser before making allocation decisions.

People routinely underestimate how long they will live. A 65-year-old today has a meaningful probability of living into their late 80s or beyond, according to actuarial data from the Social Security Administration. A retirement that lasts 25 to 30 years puts real strain on even well-funded portfolios, particularly when combined with healthcare costs, inflation, and market downturns early in retirement.

Spending flexibility helps, but it has limits. Cutting discretionary costs is possible; cutting essential costs like housing, food, and healthcare is much harder. Why retirees outlive their savings examines this risk in practical terms and explains why planning for a longer-than-expected retirement is worth the effort.