4 Lingering Myths About Saving for Retirement

Sometimes "conventional wisdom" isn't wise at all. These four myths have wide circulation, but they aren't true and could hurt your retirement savings.

In a column last year, we looked at some retirement myths that won’t go away, including the idea that if you own a dental practice that appreciates in value, you won’t need other retirement income, and that Medicare will handle all of your healthcare and dental needs when you retire.

But there are many other persistent retirement myths, so let’s take a stab at them, too.

Myth: It’s too late to start a retirement plan now.

This myth is a real doozy—one that has been harming potential investors across all careers and age groups. “If only I had started saving a few years ago,” the thinking goes. “Oh well, it’s too late now.”

If that sounds familiar, don’t get caught up in this myth. It is never too late to start saving for retirement, even if you’re close to the age you once envisioned would be your retirement age. Yes, starting earlier is always better, but cranking up your savings now can make a big difference in your retirement accounts. Those over the age of 50 also benefit from the ability to contribute more each year to a 401(k) plan or individual retirement account (IRA). These are called “catch-up contributions,” and the limit in 2016 is $6,000 higher than it is for an individual plan. See the IRS website for full details on contribution limits.

Why is there a special provision that allows people over 50 to save more? Because this is not a unique situation. Many people before you have starting saving later and are now living comfortably in retirement. There is still time. Get started today. Also, make an appointment with a financial advisor who can help you develop a strategy for potential growth over a shorter investing window. (Just be aware that seeking a higher return will also mean taking on more risk.)

Myth: Re-investing profits from your dental practice will increase the value of your practice, ensuring a safe retirement.

This is a tough myth to deal with, in part because it makes logical sense that building and maintaining your business will ultimately increase the marketability and ultimate sale price of the practice. But the simple truth is that the sale price when you’re ready to retire will be determined by a host of factors beyond the investment you made in the business, including the state of the overall and local economy, property values in the area, unexpected competition locally, and many other factors that are beyond your control.

To combat this myth, make sure you pay yourself separately as an “employee dentist” as a business owner. Funds that are left over after you’ve paid the bills and financed any service, staff, or equipment upgrades is practice profit that can set aside for retirement.

Myth: If you choose to work longer, you won’t have to withdraw any of your funds from taxable accounts until you need them.

By age 70 ½ (with some exceptions), you’ll need to start taking distributions from your tax-deferred retirement accounts, even if you’re still a working dentist. This is what’s known as Required Minimum Distributions. While you can still save, invest, and earn on the bulk of your retirement savings, amounts you must withdraw will start to impact the growth of your ongoing retirement investments.

You can find the amount you’ll have to withdraw and the age at which you’ll need to start withdrawing from this page on the Internal Revenue Service website. If you’re nearing the age of 70, talk to your advisor about the impact on your investments and what your options are if you’re continuing to work.

Myth: Only those nearing retirement or in bad health need long-term care insurance.

As a healthcare professional, you should be less susceptible to this falsehood, but even physicians can get caught up in short-term thinking about long-term care. Estimates from Health and Human Services show that about 70% of Americans over the age of 65 will need long-term care at some point. Rates for long-term care insurance continue to rise alongside the cost of care. If you secure a policy while you’re still working and in good health, you’ll pay lower rates and feel more secure. Many experts recommend looking into long-term care coverage starting in your mid to early 50s. Shop around, as prices for policies can vary widely.

Retirement myths are damaging, mostly because they lead to inaction when the investor would be better served by action. Taking an active role in your retirement planning will keep these and other myths from getting in your way.