People’s vision of retirement is changing, and the choices they make are highly individual. Some plan to pursue recreational activities, such as golf, travel or gardening. But many others say they’re going to work part-time, start a business, or go back to school.

No matter what you choose to do in retirement, you’ll get more out of it if you’re financially prepared. By examining some of the most common “myths” of retirement, you may discover steps you can take today to help your vision for retirement become a reality.

Myth #1: I’ll need 60 to 80 percent of my pre-retirement income to live on during my retirement.

Reality: The amount you’ll need depends on your individual vision.

The truth is that there is no right percentage for everyone, because we all have different visions for the “ideal” retirement. Your need for retirement income depends on a variety of factors, including work, travel, hobbies, relocation expense, and more.

Myth #2: I won’t every need long-term care. And even if I do, government programs like Medicare will pay for it.

Reality: 42 percent of individuals over age 65 will need some type of long-term care services in their lifetime. Less than 10 percent of long-term care costs are paid by Medicare. (New England Journal of Medicine, Feb. 28, 1991.)

Today, a year in a nursing home costs an average of $40,000. And in some parts of the country it can even exceed $100,000. Home health care services average about $15,000 per year.

Who pays those bills? About one-third of all long-term care costs are paid-out-of-pocket by individuals and their families. The rest is paid for by Medicaid after individuals “spend down” their personal savings to meet federal poverty guidelines.
You spend a lot of time and energy building the assets you need to enjoy a comfortable retirement. That’s why truly comprehensive retirement planning should also include the consideration of long-term care to protect your family and your life’s savings.

Myth #3: Once I’m retired, I won’t have to worry about investing for growth.
Reality: If you retire at age 60, your investments my have to last another 20 to 30 years. You’ll still need some growth potential, which you are more likely to achieve through stocks.

When you retire, your investments have to keep on working. For one thing, you may need almost as much income – or even more – than you did before you retired. Furthermore, you still have to stay ahead of inflation.
Of course, your investment choices will depend largely on your needs and goals. But here are a few suggestions on investing in retirement:

• Continue thinking long term

• Adjust your asset allocation mix

• Don’t take income you don’t need

Myth #4: My tax bracket will be lower after I retire.

Reality: Don’t count on it. Your retirement income may keep you in a higher tax bracket.

Many people assume they will be in a lower tax bracket when they retire – and they base some important investment decisions on this assumption.

Actually, it’s not that simple. You may not have the income from your job any longer, but you’ll still have income, and a lot of it could be taxable. However, there are some steps you can take that may prevent a costly leap into a higher tax bracket:

• Seek capital gains – not taxable income

• Make tax-free investments

• Take minimum distributions from retirement plans

• Be generous when gifting assets

• Open a Roth IRA during your working years

Myth #5: Retirement is the beginning of the end.

Reality: More and more people are discovering that retirement is one of the best times of their lives.

People can continue to live happy, productive lives for decades after their “traditional” retirement age, provided they remain healthy, get enough exercise, stay mentally alert, and remain engaged with life.

Not surprisingly, financial well being is another determination of personal satisfaction in the retirement years. Retirees with annual household incomes of $35,000 or more are far more likely (than retirees in general) to say that retirement is better than they anticipated, according to a poll by the Employee Benefit Research Institute (USA Today, 1997).

So what can you take from all this information? Visualize how you want to spend your retirement years. Stay busy. Take care of your health. And be diligent about your financial planning.

You can have the type of retirement that you’ve always dreamed of – and that your deserve.