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SMALL BUSINESS
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Debunking the Myths
There's nothing worse than not being prepared for retirement, than finding out that your planning -- or lack thereof -- was based on faulty thinking.
Money Magazine clears up some popular, but misguided, beliefs about feathering your retirement nest. Click through our gallery to see if you've fallen for any of these 13 myths.
Next: Myth No. 1More 'Retire Rich' Features:
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Myth No. 1:
You need a big income to have a big nest egg.
With planning, discipline and a little ingenuity, Bill Scott has built up real estate savings and real estate equity worth about $800,000 over the past 20 years. In addition, he has 529 accounts worth $25,000 for his children. The surprise? He accomplished this on a Marine's salary.
· More on This Busted Myth
Next: Myth No. 2More 'Retire Rich' Features:
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Myth No. 2:
You can't get rich with
a 401(k).
When Tim O'Friel graduated from college, his brother gave him sage advice: Put as much as you can in a 401(k) and don't touch it. O'Friel took that to heart, saving 15 percent of his salary until he reached the IRS max. After 13 years of steady contributions, O'Friel has a
401(k) worth more than $200K.
· More on This Busted Myth
Next: Myth No. 3More 'Retire Rich' Features:
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Myth No. 3:
Everyone has debt.
The Pearsalls have lived frugally, saved regularly and invested wisely in their 30 years of marriage. They've also managed to avoid the kind of crippling debt that can spoil the best-laid retirement plans. They steered clear of credit cards by living within their means, and dutifully paid their mortgage. They now owe just $64,000.
· More on This Busted Myth
Next: Myth No. 4More 'Retire Rich' Features:
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Myth No. 4:
A million will cover you.
A million dollars has long been the retirement portfolio gold standard, and why not? That's a rich sum. But let's get the bad news out of the way quickly. If you earn six figures and have no intention of living on an austerity budget when you stop working, you may need far more than $1 million to support yourself for the rest of your life.
· More on This Busted Myth
Next: Myth No. 5More 'Retire Rich' Features:
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Myth No. 5:
Boomers will crash the market.
Stock ownership is extremely concentrated among the very highest income brackets. These wealthy investors are unlikely to be so strapped for cash that they have to sell their shares in a hurry. Instead, most affluent families intend to preserve assets for their heirs.
· More on This Busted Myth
Next: Myth No. 6More 'Retire Rich' Features:
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Myth No. 6:
Without a pension, you're doomed.
The defined-benefit pension was never a fabulous deal for most workers. It's designed to reward longtime employees, so the size of the pension depends in large part on how long you stay with your employer. If you switch jobs a few times, as most people do, you lose most of the benefit.
· More on This Busted Myth
Next: Myth No. 7More 'Retire Rich' Features:
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Myth No. 7:
Social Security won't be there.
Despite the alarming studies, Social Security isn't going away. Enough new money will continue to flow into the program from payroll taxes to fund 70 to 75 percent of scheduled benefits until 2081. And with a few reforms, Social Security could continue to pay full benefits.
· More on This Busted Myth
Next: Myth No. 8More 'Retire Rich' Features:
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Myth No. 8:
Your house can finance retirement.
Treating your house as the ultimate retirement insurance is an easy trap to fall into. But it's not a strategy that will work very well. It's hard to eat out on your home equity. You have to live somewhere. Yes, you can move or get a reverse mortgage, but there are cons to consider with either option.
· More on This Busted Myth
Next: Myth No. 9More 'Retire Rich' Features:
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Myth No. 9:
You're too old to start saving.
Okay, it would have been better to start saving early, but let's face it: Most people don't. Still, there's hope for late starters (even those starting at 50). A few years of serious saving can make a huge difference to your quality of life in retirement.
· More on This Busted Myth
Next: Myth No. 10More 'Retire Rich' Features:
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Myth No. 10:
Short-term market swings don't matter.
It's comforting to look at historical returns. Despite the occasional setback, the market continues to rise over the long run. In any 10-year period since 1926, you'd have made money in stocks 97 percent of the time; over 20 years you'd be ahead 100 percent of the time. As long as you're patient and keep investing, you'll do well, right? Not necessarily.
· More on This Busted Myth
Next: Myth No. 11More 'Retire Rich' Features:
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Myth No. 11:
Top priority is the kids' college.
Unless you expect your children to support you in retirement, stop thinking like an all-nurturing parent. It's only natural to believe that college needs are more pressing than your far more distant retirement. Problem is, this kind of thinking can lead you to pass up a big weapon: the power of compounding.
· More on This Busted Myth
Next: Myth No. 12More 'Retire Rich' Features:
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Myth No. 12:
Decent Savings Plan = Early Retirement
Wouldn't it be great to call it a career in your fifties and spend the second half of your life doing whatever you want -- with no money worries to get in the way? For many Americans that's the dream. Yet when you consider how much you have to overcome to retire early, that dream looks more like wishful thinking.
· More on This Busted Myth
Next: Myth No. 13More 'Retire Rich' Features:
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Myth No. 13:
You're bound to mess up your 401(k).
Many plans will give you advice or even account management. Your plan sponsor may automatically enroll you, raise your contribution level each year & direct your money into diversified investments, unless you opt out. So even if you never make an independent investing decision, you can nevertheless wind up with a decent portfolio.
· More on This Busted Myth
Next: More on AOLMore 'Retire Rich' Features:
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Best Places to Retire:
Money looked at 30 of the nation's largest metro areas and found the right neighborhoods for you. See The Top Picks
More Retirement on AOL:
Retirement Mistakes Pros Made More Great Retirement Spots Retirement Community Tips Retirement Advice Retirement Living
More From CNNMoney:
Harvest a Rich 401(k) Make Your Money Last Seniors: Where to put $200,000More Money & Finance
Best Places to Retire
Don't want to move to the middle of nowhere when you retire? Money Magazine combed 30 of the country's largest cities and found the best neighborhoods to live out your golden years.
Top Retirement Tips
Move beyond retirement myths with these stories & tools:
- The Inflation Threat
Shield your nest egg.
- Retirement Risk
Who's falling short when it comes to retirement savings?
- When to Cash in Your IRA
Save all you can, but don't wait too long to spend it.
- Can You Retire Early?
Want to quit at 60? This is what you should have now.
- Income for Life
See how much your nest egg is worth in monthly payments.

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