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Opinion: Women face myriad retirement myths

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Historically, the road to retirement hasn’t been smooth for many women. In fact, the Social Security Administration reports that 17 percent of all elderly, single women live in poverty, and with today’s longer life spans, this figure could rise.

By recognizing the following myths, women can take control of their financial futures and help improve this startling statistic.

Myth No. 1 – Social Security will take care of me in retirement.

The reality is that Social Security income probably won’t be enough. At the start of 2011, the average monthly retirement benefit reported is $1,177. SSA data also shows that women’s benefits are almost one-third lower than men’s. A benefits estimator is available at SSA.gov, but it’s also important to plan for additional income sources when determining a retirement income target.

Myth No. 2 – I won’t need nearly as much to live on when I retire.

This sounds reasonable when you consider the costs associated with raising children and commuting to work each day, but it’s probably safe to assume that you’ll have higher health care costs, and there may be long-term care costs, eventually. Many financial professionals use the rule of thumb that calls for 60 percent to 80 percent of current income for retirement, adjusted for inflation, to maintain current lifestyle. It depends, however, on how you plan to spend your time in retirement. If you want to travel, it will come with a cost.

It might be a good idea to test a planned budget for a few months before retirement so that if income or expenses are unrealistic, retirement can be postponed or you can explore ways to cut expenses.

Myth No. 3 – My 401(k) contributions will fund my retirement without my involvement.

Fact is, you might get even more benefit from your plan by taking an active role in your investment selection. If you have several years until retirement, choosing too conservative investments may cause you to fall short of the dollars you need. On the other hand, if retirement is approaching, you may need to move aggressive investments to the more conservative side. Remember to review your choices regularly to make sure your investment selection is in line with your goals.

By establishing a relationship with professionals who can help you at critical times, you can face your unique financial challenges realistically and achieve your retirement dream.

Paula Dougherty, CFP, ChFC, CLU, is a senior financial adviser with Dougherty & Associates, Ameriprise Financial Inc. in Springfield. She is licensed in Missouri, Arkansas, Kansas, California and Arizona, and may be reached at paula.j.dougherty@ampf.com.[[In-content Ad]]

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