The 5 Most Common Misconceptions People Have About Retirement (五種關於退休的常見謬誤)

Source: Root Financial

Many people think they know what retirement will be like, but are met with surprises once they’re there.

It's important to know what to expect financially and non-financially to have a great retirement.

Today we're discussing the most common retirement misconceptions to help you navigate yours more confidently

You’ll learn:

❌ Why you shouldn’t rely on dual income if you have a spouse

✅ How risk aversion may be unfairly damaging your portfolio return

🏡 What your home’s role is as a retirement asset 

Learn the tips & strategies to get the most out of life with your money.

⏱ Timestamps ⏱

0:00 Intro

0:35 Dual income

2:40 Stock market risk aversion

6:55 Accounting for inflation

8:49 Considering your home a retirement asset

10:43 Not having a job

12:15 Outro

a lot of people think they know what retirement's going to be like

but then they're met with all kinds of surprises once they're actually there

in today's video

I'm going to share with you the five most common misconceptions about retirement

so that you can better plan for yours

hey everybody I'm James Canole

founder of root financial

and I'm here to teach you to get the most out of life with your money

going into retirement you don't want surprise

it's at least not bad surprises

you want to know at least one basic standpoint

what can you expect financially as well as non-financially

well in today's video

I'm going to share with you five things that people commonly get wrong about retirement

so you can avoid making these same mistakes when it comes to your plan

one of the first mistakes people make when it comes to planning for their retirement on the financial side

is they think they can rely upon two incomes forever

what do I mean by this

well let's assume that a couple wants to spend eight thousand dollars per month in retirement

let's also assume that both couples both spouses have three thousand dollars per month coming in from Social Security

well in this case

if 6 000 is coming in from Social Security

eight thousand is what they want

only two thousand needs to come from their portfolio

so if they had about five hundred thousand dollars generating five percent per year on income

that would about cover the gap

but what happens in the event that one spouse predeceases the other

Well Social Security in that case would be cut in half

so now all of a sudden

if you want to live on eight thousand dollars per month

you don't have six thousand coming in to help support that

you have three thousand per month coming in

now granted some of the expenses will probably go away

but they won't be cut in half

so now all that's sudden

you're in this difficult position if one spouse passes away

your portfolio needs to do a lot more leg work

and you can't just ask your portfolio to fill the gap there

it's going to be bound by certain safe and sustainable withdrawal rates

so if you're going into retirement expecting to have two incomes forever

and if one of those incomes is unexpectedly cut short

it's going to be a very difficult thing for your plan

you're going to have to make some major adjustments

so as you're looking at retirement

plan for contingencies

it's not fun to talk about

but how can you protect yourself

how can you protect your surviving spouse

make sure that you have an understanding that we can start with two incomes

but if something happens to one spouse first

what would be our fallback plan

do we make sure we have more saved in retirement assets to cover the shortfall when that happens

do we make sure there's some expenses that we could potentially cut in that event if something happens

would you sell the home and downsize to cut expenses if something happens

you need to make sure there's a plan

because when the spouses both think we can rely upon these incomes forever

they both live the same number of days

that's right

but if they don't there's going to be a shortfall

so make sure you're planning for that ahead of time

2:39

the second misconception people have about retirement is that the stock market is the biggest risk to their success

now this is understandable

when you look at the stock market

who doesn't have a story about a relative or a co-worker someone who wanted to retire

but then there was a major bear market

and they had to keep working much longer

well in some cases that's true

in some cases is due to improper management of funds

but here's what I want you to focus on

let's actually look at the risk of the stock market and compare that to what most of us might think of as

risk-free

so one month T-bill

which is essentially a bond that the government issues for one month

it will pay you interest

a small amount of interest for holding that bond for one month

well if we go back over the last 80 years and say what was the worst ever 12 month return on the S&P 500

so we'll use that as a benchmark for the stock market

versus what was the worst ever return on a one month T-Bill

the differences are astounding

the worst one year return on the S&P 500 was

it was down 43 percent

so if you have a million dollars in your portfolio

one year later

that million dollars is worth five hundred and seventy thousand dollars

if it's all invested in the S&P 500

it's a very difficult thing to stomach

it's a very difficult thing to go through and to recover from

now compare that to a T-bill

the worst ever one year return on a T-bill over the last 80 years

was returned 0.01 percent

so positive outcome

now it was a negligible amount of interest

but it was still a positive outcome

so when you're comparing these two

it's easy to see why people say

hey the stock market stuff's super risky

there was a year where I lost 43 percent of my money in the stock market

whereas with a T-bill

my worst ever experience was gaining 0.01 percent

it's not gonna make me rich

but it's certainly not gonna make me poor in that year

so of course

this seems more risk-free

well that's only after one year

the hard part about understanding retirement is

retirement's much longer than one year

you might have a 20 30 plus year retirement

so we have to look at big picture here

let's zoom out what was the worst ever 20-year return on the S&P 500 over that time frame

so over the last 80 years

all the different rolling 20-year time periods in the midst of that range

what was the worst case scenario in the S&P 500

well the worst case scenario in the S&P 500 was

it gained 4.8 percent over 20 years

now what I mean by that is 4.8 percent on average per year

and that was starting April of 2000

so if you put all of your money into the stock market in the S&P 500 on April of 2000

you only averaged 4.8 percent per year for the next 20 years

now this isn't a very good return

because historically the index has done more than double that

but over your 20-year time period

that's your worst case outcome

doesn't start to seem as bad

and we see that the worst case scenario for a T-bill over 20 years was a return of 1.14% per year

so what we start to see is

in the short term

the T-Bill is much safer than the stock market

but when we start to expand that to 20 years

the worst case scenario now granted the future anything could happen

but for just look in the past 80 years for perspective

the worst case scenario for the U.S stock market over the last 80 years

returned more than four times what a T-bill would have done in the same instance

so it's 4.8 percent for the S&P 500 compared to 1.14 per year for a T-bill

what does that look like practically speaking

well if you invest a hundred thousand dollars into the S&P 500 in its worst 20-year period over the last 80 years

that one hundred thousand dollars grew to about 255,400 dollars

so a pretty decent return

had you invested into T-bills instead because you're concerned about what the stock market does in the short term

those T-bills would be worth 125,400

so 155,000 of growth and change invest in the market

compared to twenty five thousand dollars of growth invested in T-bills

you can start to see what is actually more risky

and the short term it's absolutely the stock market

but if you have a long enough time horizon

now all of a sudden

the thing that's going to return the least is probably the thing that's most risky

so how do we make sure that we're viewing risk properly in the right context

6:51

and this ties into the third mistake or misconception that people have about retirement

is when they're planning for retirement they're ignoring the impact of inflation

now if you look at inflation historically

it's been around three percent per year

it's been much higher here in the last year or two

but historically it's been about three percent

so let's look at our last example here to see how this risk plays out

we looked at what if you invested a hundred thousand dollars into the S&P 500

what if you invest a hundred thousand dollars into one month T-bills

and we saw that one gave you about 255,000 in the worst case scenario for the S&P 500

and one gave you about a hundred and twenty five thousand dollars

if you would invest in T-bills and their worst 20-year time period over the last eight decades

now it seems like both of those had positive outcomes until you factor in inflation

7:37

if we just assume an inflation rate of three percent

then your hundred thousand dollars would need to go to a hundred and eighty thousand dollars

just to offset the impact of inflation

so not to grow your money

not to grow your real net worth

but just to keep up with inflation

so now when we compare 180,000 to T-bills that only grew to a hundred and twenty five thousand dollars if you invested a hundred thousand and their worst ever 20-year time period

you can start to see there's a loss there

there's a nominal return

but there's a real loss

now as you apply that to the rest of your plan

over the course of a 30-year retirement

you can expect your living expenses to go up two and a half times

if there's a three percent inflation rate

meaning if you need a hundred thousand dollars to live on in year one of retirement

and expenses stay the same

but go up with inflation you would need close to two hundred and fifty thousand dollars by your final year of retirement

simply to maintain what a hundred thousand dollars could purchase today

so when people ignore that

what they do is they plan for an income amount

but if that income amount is not adjusted for inflation

your purchasing power is declining every single year

so you cannot ignore the impact of inflation if you want to build a proper retirement plan

8:50

the fourth mistake people make about retirement is they consider their home a retirement asset

now this is not a video about whether real estate's a good investment or not

that's a different topic for a different day

this is a video all about understanding the role that your home would play in your retirement portfolio

it's about is your home a great retirement asset not an asset in general

now what makes something a good retirement asset

well

it's something that can create income for you either through dividends or interest

and actually create an income or appreciating in value so you can sell it and live on the proceeds

now unless you have an intention of selling your home

your home is not creating income for you

now granted this is a different story if you rent it out

or if you do some type of reverse mortgage

or refinancing or something else

but I'm going to table those for now

if you just look at your home as a wonderful place to live in and to stay

it's not a retirement asset

I don't care if your home is appreciating by more than the stock market every year

if you never plan to sell or if you never plan to somehow monetize that

it's not a retirement asset

retirement's all about generating cash flow

how do you generate income that's sufficient to meet your expenses

if you have a home

even if it's worth two three five ten million dollars

that's not generating income

it's not a retirement asset

in fact I would argue it's a liability

the greater the value of your home

the higher your property taxes

in general the higher the maintenance costs

that's adding to the expense side of the equation in retirement not the income side

so when I hear people talking about

oh I'm going to retire and it's going to be wonderful and I've got a great net worth

but look at their balance sheet

and the majority of their net worth is in their home

that's wonderful

but how are you going to generate income to meet your needs

we can plan for your home as part of your overall net worth

as part of your legacy strategy

or part of your retirement strategy

if you intend to sell it or somehow monetize the equity in the home somehow

but if it's not going to

then it's not part of your retirement plan

10:44

and then finally the fifth misconception people have about retirement is that they'll love not having a job

now here's the interesting thing about having a job

you probably will love not having any deadlines anymore

not having to wake up early to go to work

not having to report to that boss you don't really like

however there's two types of freedoms

there's the freedom from and there's freedom to

when you retire you'll have freedom from

freedom from those deadlines

freedom from those co-workers

freedom from doing those things you don't really want to do

the harder part though is the freedom to

you have the freedom to do whatever you want

to do what activities you want

to spend time with who you want

to spend your days doing only things that you want to do

to a lot of people

that's very scary

so all I think about is the freedom from having to work anymore

if you're not also thinking about freedom to

and how do you create your routine

and create your structure

and create your intentional life

you're probably not going to love not having a job as much as you thought

in fact if you don't get this right

you may just be aimless

so you may wander throughout retirement

not really knowing what to do with your days after having freedom from your job

so make sure you understand the other side of freedom

the freedom to pursue what you want to do

I don't care how financially squared away you are

if you don't have that piece right

you're not going to enjoy your retirement

so yes

it's good to have the freedom from

but create that freedom to

and have an understanding of what you're going to use that freedom to do

so to me that last point is the most important one

the biggest misconception people have going into retirement

you need to make sure you have a plan for what you're going to do