Retirement planning is full of so-called “rules of thumb” that people often take as absolute truth. But many of these popular beliefs are either outdated or dangerously misleading. Relying on them without question could leave you short of funds when you need them most. Here are five of the biggest retirement myths — and what you should understand instead to retire with confidence.
Myth #1: The 4% Rule Always Works
The “4% rule” suggests that you can safely withdraw 4% of your portfolio each year in retirement without running out of money. While this idea has guided countless investors, it’s far from foolproof.
The original research behind the rule assumed a balanced portfolio — roughly 60–70% in stocks and 30–40% in bonds. If your portfolio differs significantly, the rule may not apply. For instance, retirees who were 100% invested in stocks and withdrew 4.7% annually during the high-inflation years of the late 1960s would have run out of money in less than 20 years.
Rather than treating 4% as a strict rule, it’s better to view it as a guideline. Flexible spending — withdrawing more during strong market years and less during downturns — can dramatically increase your odds of success. Maintaining a “cash bucket” for tough markets, while adjusting withdrawals when conditions improve, helps your portfolio last longer.
Finally, retirement income should never depend on just one source. Combining withdrawals with Social Security, pensions, or part-time income makes your plan more resilient and less vulnerable to market swings.
Myth #2: You Should Get More Conservative With Age
The traditional advice says to reduce your stock exposure as you age — the so-called “100 minus your age” rule. For example, a 65-year-old would hold 35% in stocks and 65% in bonds. This approach does reduce short-term volatility, but research shows it may not be the most effective long-term strategy.
Studies from retirement experts like Wade Pfau and Michael Kitces have found that retirees might actually benefit from increasing their equity exposure gradually over time. Starting retirement conservatively protects against early market losses (known as “sequence of returns” risk), but gradually adding stocks later can help portfolios keep up with inflation and last longer.
Of course, this approach isn’t for everyone. More stock exposure means more volatility, so it’s essential to maintain cash reserves, flexible withdrawals, or supplemental income to avoid selling stocks during downturns. Ultimately, your ideal mix should let you sleep at night — what some call the “pillow test.”
Myth #3: Social Security Will Be Gone by the Time You Retire
It’s common to hear that Social Security will “run out of money,” but this fear is exaggerated. While the program faces a funding shortfall by the 2030s, that doesn’t mean it will disappear. Current projections show that if no reforms are made, benefits could drop to around 70% of current levels — a significant cut, but far from zero.
Lawmakers have multiple options to fix the shortfall, such as adjusting the payroll tax cap or retirement age. Complete elimination would be political suicide, so benefits are expected to continue, though possibly modified.
How you plan for this depends on your age:
- 20s–30s: Assume you’ll receive little or no benefit — build a plan that doesn’t rely on Social Security.
- 40s: Factor it in conservatively, perhaps 50–70% of projected benefits.
- 50s–60s: Expect to receive benefits close to what’s shown on your statement, with only modest changes likely.
Treat Social Security as a supplement, not the foundation of your retirement plan.
Myth #4: You’ll Spend Way Less in Retirement (and Taxes Will Be Lower)
Many people assume retirement means lower spending and taxes. In reality, spending habits are remarkably consistent. Studies show that income persistence — the tendency to maintain similar spending patterns — is strong. High earners tend to remain high spenders, and the decline in expenses during retirement is usually slow and modest.
On average, spending drops by less than 1% per year for middle-income retirees, and even less for high-income households. Moreover, if your lifestyle remains similar, your taxes may not fall much — and could even rise.
Why? Many retirees hold large balances in traditional (pre-tax) retirement accounts, and once required minimum distributions (RMDs) begin, those withdrawals count as taxable income. Combined with Social Security benefits and other income, you might find yourself in a higher tax bracket than expected.
The smart move: stress test your budget, plan for RMDs, and consider tax diversification by using Roth accounts or strategic conversions before retirement.
Myth #5: You Can Just Work Longer If You Fall Short
Working longer sounds like a simple fix — but it’s not always in your control. Research shows that around 60% of retirees leave the workforce earlier than planned, often due to layoffs, health problems, or family caregiving duties.
This is unfortunate, because the last few years before retirement are often when your portfolio grows the fastest, thanks to compounding. For example, $500,000 invested in an S&P 500 index fund at the start of 2019 would have grown to roughly $1.3 million by the end of 2024 — without any additional contributions. That difference could mean $20,000 per year in income versus $52,000 per year using the 4% rule.
To avoid being caught off guard, start saving aggressively early, give your investments time to grow, and build flexibility into your plan. That way, if life forces you into early retirement, you’ll still have the resources to live the life you’ve envisioned.
The Bottom Line
The biggest danger in retirement planning isn’t the market — it’s believing myths that lead you astray. Rules of thumb like the 4% rule or “get conservative with age” can be helpful starting points, but they’re not universal truths. The best retirement plan is one that’s flexible, diversified, and realistic about the uncertainties of life and markets.
Retire with strategy, not superstition — and your financial future will thank you.
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