These 3 Assumptions Could Wreck Your Retirement

Retirement isn't the sort of thing you should dive into on a whim. Rather, it's a stage of life that requires proper planning.

But even if you're making an effort to plan out your retirement, the wrong assumptions could throw you for a loop. Here are three that could seriously ruin your senior years.

Image source: Getty Images.

1. "Social Security will cover all of my bills"

Social Security might end up being an important income stream for you in retirement. But if you're counting on those benefits to cover your bills in full, you may be in for a very unpleasant surprise.

Your monthly Social Security checks might replace about 40% of your pre-retirement wages if you earn an average salary. But unless you're looking to take a 60% pay cut in retirement, you'll need income on top of Social Security to maintain a comfortable lifestyle.

Plan ahead for that by building a retirement nest egg. And if you've been funding an IRA or 401(k) but aren't happy with your progress, take a close look at your spending and see if there's room to cut back anywhere. Boosting your savings rate even modestly could go a long way over time.

2. "I won't have to pay for healthcare once I'm eligible for Medicare"

Some people assume that once they turn 65, all they need to do is enroll in Medicare and their healthcare needs will be covered in full. The reality is that there's a cost to getting Medicare coverage. Part B enrollees pay a monthly premium, and many Part D and Advantage plans charge premiums as well. There are also many costs that come on top of premiums, like deductibles, coinsurance, and copays.

Plus, there are certain services Medicare won't even cover, like dental care and eye exams. It's important to budget for healthcare expenses so your retirement budget doesn't become a mess. And if possible, sock money away in a health savings account during your working years so you have a dedicated pool of funds for covering future medical bills.

3. "It's best to avoid stocks completely once I'm using my savings"

You may be used to investing in stocks while you're in the process of building wealth. But one thing you don't want to do is dump your stocks completely once you're ready to start tapping your nest egg.

You might think that's the smart thing to do, since stocks carry a lot of risk. But with the right portfolio allocation, you can minimize that risk while enjoying steady growth.

It's not uncommon for retirees to maintain a roughly 50/50 split of stocks and bonds. You could even potentially go heavier on stocks if you put some protections in place, like having a couple of years' worth of living expenses in cash.

The wrong assumptions have the potential to mess up your retirement plans. So don't let that happen. Have realistic expectations for Social Security and Medicare, and work with a financial advisor to come up with a portfolio allocation that allows you to benefit from stock market gains without taking on too much risk.

The Motley Fool has a disclosure policy.