3 Money Myths That Could Ruin Your Retirement

One of the scariest parts of retirement planning is that it's tough to tell whether you're on track. Everyone has different goals, and even if you save enough to reach your target, it's impossible to guarantee it'll be enough to last the rest of your life. You might reach retirement age thinking you've done everything right, only to find out your money won't go nearly as far as you think it will.

Although saving for retirement isn't easy, you might be making it more difficult than it needs to be. There are a few money myths that can trick you into believing you're doing everything you should to prepare for retirement, when in fact, you might be doing more harm than good.

To ensure you're not inadvertently setting yourself up for money problems in retirement, make sure to avoid falling for these three myths. Worker with his head on his desk and his laptop over his head, with his hands crossed on top of the laptop. There are crinkled papers on the desk along with a drink and glasses.

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Myth No. 1: You'll spend less in retirement than you're spending now

One of the basic building blocks of retirement planning involves estimating how much you'll be spending each year once you leave your job, and an oft-cited guideline is to assume you'll be spending around 75% to 85% of your pre-retirement income each year.

For some people, that's plenty of retirement income to survive on. If you're planning on hanging out at home most of the time during retirement, working on your hobbies and catching up on your reading, you may not spend as much each year as you do now. But that's not the case for everyone.

Approximately 80% of retirees experience significant changes in spending compared to their pre-retirement years, according to a report from J.P. Morgan, and more than a third spend substantially more in retirement -- either temporarily or consistently. The report also noted that many retirees spend significantly more in their first few years of retirement. Typically, retirees will see their spending levels gradually decrease as they settle into their senior years, but they often experience an uptick in spending once again as they age and healthcare costs take a bigger bite out of their budgets.

While your costs aren't guaranteed to increase in retirement, you may end up spending more than you anticipated each year -- which can result in running out of money too quickly. As you're planning for retirement, make sure you have a relatively accurate idea of how much you'll be spending. You don't need to budget for every penny you'll spend, but the better estimate you have, the fewer surprises you'll run into.

Myth No. 2: It will be easier to save if you wait until you're earning more money

When you still have decades left before you can even think about leaving your job, retirement planning may be the last thing on your mind. And if you don't have much cash to spare, you may choose to focus more on other financial priorities and wait to save for retirement until you're earning a higher salary.

While that sounds like a reasonable plan, the longer you wait to begin saving for retirement, the more you'll need to save each month to reach your goal. Building a robust nest egg takes decades of consistent saving, and if you wait until you're just a few years away from retirement, it might be too late to reach your goal.

Say, for example, you're currently 30 years old with no retirement savings and want to save $750,000 by the time you turn 65. If you were to start saving right now, you'd have to sock away approximately $450 per month to reach your goal, assuming you're earning a healthy 7% annual rate of return on your investments. But if you were to wait until age 45 to start saving, you'd need to save just over $1,500 per month to accumulate roughly the same amount by age 65.

In other words, you can wait until you're earning more money to begin saving, but you'll need to contribute a heftier chunk of your paycheck toward your retirement fund to still achieve your goals. So even if you don't have much to save now, it's still smart to save what you can. If you start earning a higher salary down the road, you can increase your retirement fund contributions to reach your goal more quickly.

Myth No. 3: You can survive primarily on Social Security benefits

One in five married couples and close to half of single beneficiaries rely on their Social Security checks for at least 90% of their retirement income, according to the Social Security Administration. That's a worrisome statistic, considering your benefits aren't designed to be your primary income source in retirement.

Your monthly checks are only intended to replace around 40% of your pre-retirement income, and unless you have access to a pension or other source of cash, the rest of your retirement money will need to come from your personal savings.

Exactly how much money will need to come from your retirement fund each year will depend on how big your Social Security checks are. You can estimate your future benefit amount by creating a my Social Security account, which uses your real earnings to give you an idea of how much you can expect to receive once you start claiming benefits. Keep in mind, though, that that number isn't set in stone and could fluctuate depending on how many years you have left before retirement, as well as what age you begin claiming benefits.

Once you have a rough estimate of how much you can expect to receive from Social Security, you can plan how much you'll need to save. For example, if you figure you'll spend around $50,000 per year in retirement and you expect to receive $20,000 per year from Social Security, you can set a goal of saving enough so that you can withdraw $30,000 per year from your retirement fund.

Saving for retirement is hard enough as it is, but falling victim to any of these myths could make it even more challenging -- especially if you reach retirement age and suddenly realize you don't have enough saved. However, by making sure you're as informed as possible about how to prepare for retirement, you'll ensure you're doing everything you can to build a healthy nest egg that will last the rest of your life.

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