Top Five Retirement Myths

1. $1 Million Will Be Enough

Hardly—and don’t rely on simple retirement calculators for help. To come up with a number, calculators essentially take one figure that retirees seldom predict accurately (how much they'll spend every year) and multiply it by another (how long they'll live). Advisors and planners say the most effective calculators use dozens of variables and ask for frequent updates. But even then, anything unexpected can derail a boomer's plans.

2. You'll Spend Less When You're Older

Boomers approaching retirement are likely to run into a rule of thumb like this, from one brokerage's online calculator: "You need about 70% to 80% of your annual pre-retirement household income during retirement." That figure seems to reflect reality: The Federal Bureau of Labor Statistics reports that in 2009 the average person in the 65-to-74 age range spent about $43,000, while the average person age 55 to 64 spent more than $52,000. Over time, the idea that spending falls in retirement has become a mantra of financial planning. No more commutes, no more kids to feed—and no more business attire.

The question, of course, is whether retirees spend less by choice—or because they don't have a better choice, financially. A deeper dive into the federal statistics shows some interesting wrinkles. The spending categories that drop the most after age 65 include education (presumably, the kids have grown) and pensions (no more paychecks means no more payouts for 401(k)s or Social Security), but most other categories drop only slightly.

3. Older People Need More Bonds

Even a cursory look at the headlines shows it's a shaky time for bonds, with inflation fears rising and government finances in bad shape. But while some Main Street investors are finally pulling money out of bond funds, the industry is still pumping out new products in response to the bond boom of two years ago: Last year the number of bond exchange-traded funds—products that track bond indexes but trade like stocks—rose by 51 percent, to 137, according to research site ETFdb. And many companies have been redesigning their 401(k)s to funnel investors into target-date funds, which automatically steer older investors into— you guessed it—bonds.

4. Your Money Lasts Longer if You Move

For boomers in expensive coastal cities, the idea of leaving town has become a linchpin of retirement strategy. Who wouldn't want to trade Boston's dreary winters for the Gulf beaches of Texas—where there's no income tax and housing costs only a third as much as in Beantown? Still, a lower housing price tag doesn't guarantee low overall expenses. Couples report having learned that giving in to the desire to go home can get awfully expensive—and staying put can also cost you.

5. Uncle Sam Has Got Your Back

The recent health care reform debate underscored how much Americans rely emotionally on Medicare's safety net. But evidence suggests that most people saving for retirement don't realize how much Medicare doesn't cover—such as routine eye care, dental work and some prescription drugs. Medicare co-pays can range from 20% to 45% of the cost of many types of outpatient medical care. And the most painful bite, by far, comes from nursing home and home-health care, where the average cost for a private room was more than $75,000 a year in 2010.

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