13 retirement myths

Myth No. 1: You need a big income to build a big nest egg. Other myths busted: A million bucks is your magic number and what it takes to retire early - from Money Magazine.

Without a pension, you're doomed
MYTH
Without a pension, you're doomed
It's true that baby boomers will get far less financial help from pensions than their parents did. Seeking to cut the cost of providing retirement benefits, more and more companies are dropping or freezing their traditional plans - the ones that your boss paid for, the ones that gave you a guaranteed monthly income for the rest of your life - leaving you with retirement accounts like 401(k)s that you have to fund and manage.

In 2005 only one in 10 private-sector employees was covered solely by a defined-benefit plan, compared with 37% in 1985, while the percentage of employees with 401(k) plans jumped to 63% from 28%. Without a pension you lose the prospect of a predictable lifetime paycheck. That's the story, anyway.

But the truth is, the defined-benefit pension was never a fabulous deal for most workers. Because the traditional pension is designed to reward longtime employees, the size of the pension depended in large part on how long you stayed with your employer. So if you switched jobs a few times during your career, as most people do, you lost most of the benefit.

According to the Employee Benefits Research Institute (EBRI), last year the average annual pension payout for those age 65 and older came to just $10,902. When held up against good old pensions, the 401(k) tends to get a bum rap. Because it's portable, a 401(k) allows you to have a normal, 21st-century flexible career and still put away enough to fund a more comfortable retirement. And if it's that "check a month for life" feeling you want, it's a simple matter to convert your 401(k) savings into a pension-like income stream.
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.