4 Things Most Americans Don't Know About Retirement Savings
Saving for retirement is something you should do as soon as you land your first full-time job and keep doing until you leave the working world for good.
Most Americans probably have some familiarity with the importance of retirement savings. But not all (or even most) are aware of everything to consider to build an adequate nest egg.
Read More: I’m a Financial Advisor -- Here’s How Often You Should Check Your Retirement Account Balance
Check Out: 9 Subtly Genius Things All Wealthy People Do With Their Money — That You Should Do, Too
Here are four things most Americans either don’t know or overlook when it comes to retirement savings.
The Importance of Tax Planning
This is an extremely important part of retirement savings, but one that many Americans overlook, according to Jay Zigmont, Ph.D., certified financial planner (CFP) and founder of Childfree Trust.
“Saving and investing for retirement can be very easy, especially since you can automate much of it. [But] tax planning for retirement is harder,” Zigmont told MoneyLion.
One thing many Americans don’t get right is the tax impact of individual retirement accounts (IRAs).
“Roth [and] traditional IRAs impact not only your taxes today but also taxes in the future,” Zigmont said. “For example, I tend to recommend contributing to traditional accounts if you live in a high-tax state but may relocate to a low-tax state in the future.”
The Social Security ‘Tax Torpedo’
According to Fidelity, the "tax torpedo" refers to the fact that Social Security benefits are taxed “according to your provisional income,” which includes your adjusted gross income plus nontaxable interest income and half of your annual Social Security benefits.
For 2026, when your provisional income is above $34,000 for individuals or $44,000 for married couples filing jointly, as much as 85% of your Social Security benefit could be taxable, per Charles Schwab.
The “tax torpedo” happens when your provisional income moves you into a bracket where a higher amount of your Social Security benefit is taxable, per Fidelity.
“This means that every additional dollar of income can have a double impact — taxation of the additional dollar and taxation of another portion of your Social Security benefit,” Fidelity noted. “However, once you surpass the threshold, this double impact stops.”
Saving additional money to cover provisional income taxes could be an important step in ensuring you’re covered when you retire.
Why You Should Make an Estate Plan
Many younger adults might not put much thought into allocating part of their retirement savings toward a trust fund or estate plan. But once you hit retirement age, you’ll regret not having one.
You also shouldn’t overlook the importance of keeping your plan current and updated to align with changing tax and regulatory requirements, according to Kevin Quinn, J.D., founder and president of Legacy Counsellors P.C., an estate and business planning law firm that serves clients in Massachusetts and Connecticut.
“My advice is to be diligent in your planning and don’t abandon your trust,” he said. “Now is the time to preserve and protect your wealth.”
The Financial Impact of Long-Term Care
Planning for long-term care is another important consideration when saving for retirement – partly because it might be the largest single expense in your golden years. But many Americans overlook it when building their nest eggs.
“You are not ready to retire until you have a plan in place for long-term care,” Zigmont said. “A plan for long-term care includes both how you pay for it and who makes decisions for you when you can't. Remember that Medicare does not pay for long-term care and Medicaid only pays after you are broke.”
To help Americans navigate the added cost of summer, MoneyLion is giving away $1,000 every day through July 4. Enter the Summer Break Giveaway here (No pur. nec. Ends 7/4/26. See official rules at mlion.info/summerbreakofficialrules)
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion:
