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Don't let these myths rain on your retirement party

(BPT) - Do you dream of the day you can retire, but aren't sure how to get there? You're not alone. Many people find it easier to avoid reality when it comes to planning for retirement.

"That can lead to big mistakes in their retirement income planning," says Zachary Gipson, vice president of retirement and wealth planning at USAA.

Here's a look at five common myths that could derail your expectations for income when you retire.

Myth 1: You won't be around long enough to go through your money

The reality: Life expectancies are at record highs in the United States, so it's important to acknowledge that you or a family member may spend as many years in retirement as you did working. According to a 2010 report by the National Academy of Social Insurance, for a 65-year-old married couple, there's a 48 percent chance that one spouse will live to age 90.

To help stretch your money, consider incorporating immediate and deferred annuities into your planning. Created to provide guaranteed, lifelong income in retirement, they can also offer guaranteed growth while you're saving for it, Gipson explains.

A long retirement extends your exposure to one of financial planning's most subtle enemies: inflation. As you invest, it's important to seek a mix of assets that guard against the declining value of the dollar and that is in line with your risk tolerance and goals.

Myth 2: You should get out of stocks when you retire

The reality: Stocks can help provide the long-term growth you need to make your assets last longer since your retirement could span several decades.

You've probably heard you should reduce your investment risk as you age. But with traditional pensions being replaced by 401(k) plans, you're wholly responsible for making asset allocation decisions. As Gipson puts it, "Everyone now has to be a pension fund manager with their own money, and most people just aren't equipped to do that."

Gipson agrees with the notion of dampening portfolio risk at retirement, but that doesn't mean getting rid of stocks entirely. Rather, regularly reviewing, and if necessary, rebalancing your portfolio based on your risk tolerance can lock in gains from strong-performing asset classes and allow you to buy those that underperform at cheaper prices.

Myth 3: You can just keep working

The reality: Counting on being able to work as long as you want is dangerous, Gipson says. Employers are feeling pressure to cut costs, and with high unemployment, finding work is always a challenge. A disability also could force you to stop working prematurely.

Many people think they can simply work longer if they don't have enough money to retire. According to a recent survey by the Employee Benefit Research Institute, 74percent of workers plan to work at least part time during their retirement years, and Schaffer notes working in retirement has become a necessity for many.

Good planning doesn't rely on good fortune. Rather, your plan should both keep you from having to work the rest of your life and deal with the consequences of unexpected surprises that prevent you from earning a paycheck.

Myth 4: An inheritance will bail you out

The reality: You may be hoping for an inheritance as a potential retirement boost. But hope is not a strategy, and counting on an inheritance can create big problems if it doesn't come through.

Many people who expect to inherit money never do so, Gipson says. And even for those who do inherit money, it's often too little or comes too late to make a difference in their retirement planning, he adds. The safer thing to do is to treat an inheritance as an unexpected bonus rather than relying on it.

Myth 5: Your taxes will be lower in retirement.

The reality: Big government deficits make future tax increases much more likely. Also, taking money out of retirement accounts, such as traditional IRAs and 401(k)s, creates taxable income that can push you into higher tax brackets.

One suggestion Gipson offers is to consider converting part of your eligible retirement assets to a Roth IRA. By doing so, you'll pay taxes now, but you'll create a tax-free pool of money to tap in retirement. Diversifying with both Roth and traditional IRAs is a possible way to handle future tax uncertainty.

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