NEW YORK ( TheStreet) -- It is said that the ancient Greeks had a knack of wrapping truths in myths, the better to communicate everyday truths. An interesting concept, but one that won't wash with our investment experts, who were invited to pick their biggest retirement planning myth and debunk it, whether it be how much money you'll really need to retire comfortably or the virtues of paying off your mortgage early.
The ancient Greeks wouldn't approve, but they're not around to help you with your retirement anyway. Here's a look: Myth No. 1: $1 million will guarantee a stable retirement. Expert: Nicole Rutledge Regili, lead adviser with Orlando, Fla.'s Resource Consulting Group Not necessarily! First, $1 million today does not buy you what $1 million would buy you 20 years ago, thanks to inflation. Second, $1 million may or may not be your "number." That number is determined by many variables, but spending and portfolio returns are the most prominent. Here's what I mean: Someone earning about 7% annualized for 20 years and spending $200,000 per year would need around $2.2 million in the bank, whereas someone earning this same 7% but spending only $100,000 per year needs only half as much, $1.1 million. There's a similar relationship with the rate of return your money is earning. If your portfolio is invested very conservatively and earns 4% per year, and you want to spend $200,000 per year, you would need closer to $3 million. Myth No. 2: Health care is your biggest expense in retirement Expert: Chris DeGrace, vice president, SunTrust Investment Services ( STI) Health care certainly is a big cost, but the No. 1 expense is actually taxes.
Because many people are drawing on assets that have enjoyed tax deferral during their working years, they are forced to pull money out of those accounts at ordinary income rates. It's very important to determine a strategy that enables you to draw down retirement income across all accounts available in the most tax efficient way. Ideally you want to let the tax-deferred accounts grow as long as possible. In addition, one would want to focus on the basis of the taxable assets to decide what funds to spend.