8 Money Myths That Keep Seniors Broke

Many older adults built their financial habits on advice that made sense decades ago, but doesn't always hold up in today's economy. The world has changed. Retirements are longer, inflation eats into savings, and new financial tools can offer more flexibility. 

Yet too many seniors live by rules that keep them overly cautious, underfunded, or unnecessarily stressed. To stretch your retirement dollars further, it's time to let go of myths that no longer serve you.

Here are eight common myths that could quietly hold back your financial health.

While preserving principal sounds wise, it's not always practical in retirement. If you're living on a fixed income alone, drawing down your savings strategically can help support your quality of life.

Financial planners often recommend a sustainable withdrawal rate, such as the 4% rule, which entails withdrawing up to 4% of your portfolio in the first year of retirement and then making subsequent withdrawals based on inflation. 

The aim here is to balance spending and longevity. In some cases, refusing to touch principal may force unnecessary penny-pinching when those funds were meant to be used.

Keeping large amounts of cash may feel secure, but inflation quietly reduces its buying power over time. What feels like a "safe" bet could mean losing money in real terms. Seniors may often need to protect against longevity risk.

This may involve investing in options that keep pace with or outpace inflation to avoid outliving one's assets. A diversified mix of savings, bonds, and conservative investments may provide more stability and growth than cash alone.

Stocks can be volatile, but that doesn't mean they should be avoided entirely. A well-balanced portfolio with some stock exposure, even in retirement, can help your money grow enough to meet long-term needs.

In fact, completely avoiding equities can expose you to other risks, such as inflation and inadequate growth. The key is finding the right mix for your age, risk tolerance, and income goals.

Many retirees are surprised that expenses don't always drop as expected. Health care costs increase with age, and hobbies or travel can add up quickly. On top of that, inflation makes everyday living more expensive each year.

Planning for a flat or even slightly increased cost of living may help create a more accurate retirement budget and prevent financial surprises down the line.

Bank certificates of deposit (CDs) are a familiar option for many seniors, but they aren't always the most effective. In a rising rate environment, locking money into a CD could mean missing better opportunities down the road.

Some high-yield savings accounts and treasury bonds may offer better returns with comparable risk. The best low-risk choice depends on your liquidity needs, timeline, and current market conditions.

While high-interest debt should be avoided, not all debt is inherently harmful. A low-interest mortgage, for example, might make more sense than paying off a home entirely, especially if that money could earn more elsewhere.

Likewise, financing a necessary home renovation that improves safety or accessibility may support your independence. Smart debt may help seniors stay in their homes longer and maintain a better quality of life.

Medicare offers valuable coverage, but it doesn't pay for everything. For example, Medicare doesn't cover dental or long-term care, and seniors need to pay for Medicare Part D if they want coverage for prescription drugs.

Supplemental insurance policies, such as long-term care insurance, can help fill in the blanks, but many people don't plan for these extra costs. Without a realistic view of Medicare's limitations, seniors may face out-of-pocket expenses that derail their budget.

Relying solely on Social Security is rarely enough to maintain a comfortable lifestyle in retirement. As of January 2025, a retired worker's estimated monthly Social Security benefit is just $1,976. This amount may fall short of meeting basic needs like housing, food, and health care.

While Social Security is a necessary foundation, most retirees need additional income sources, such as retirement accounts, part-time work, or annuities, to stay financially secure. Believing otherwise can lead to a shortfall and unnecessary financial strain.

Today's retirees face a different financial landscape than their parents did. By updating your mindset and learning to challenge outdated beliefs, you can make smarter decisions that protect your nest egg and improve your day-to-day comfort.

Letting go of these myths won't just save you money. It can also help you build wealth in retirement and take full advantage of the options now available to older adults.