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Dear readers: There are common myths I hear frequently from readers who are reluctant to take more responsibility in planning for their retirement. And many of you who think you will retire in 20 years or so must be mindful that 鈥渞etirement planning鈥� requires action. It鈥檚 sad that so many people will passively allow events to determine the quality of their lives after age 66. They believe that Social Security and their retirement plans will suffice, or that they will be able to work until they drop. The six most common retirement myths are:

My living costs will be less. Balderdash! That may be true only if you are willing to lower your standard of living. But I promise you that food costs, medical care, transportation, clothing, insurance, dental care, etc., are guaranteed to rise. And while some of you may not have a mortgage, I also promise you that taxes, insurance and home maintenance are certain to cost a lot more.

My taxes will be lower. Horsefeathers! Retirees never figured they would pay taxes on their Social Security income, which became a reality in 1984. The 15-percent tax on dividend income is certain to rise, and so are taxes on gasoline, cigarettes, cell phones, etc. Federal lawmakers are considering a value-added tax. And income taxes are sure to rise so that governments can function and pay the interest on their various debts.

Our children will help us. Tommyrot! Many children can be unexpectedly selfish and possessive. Due to the 鈥渄ownsizing鈥� of America, today鈥檚 children probably will earn less than their parents. And as prices increase (I guarantee they will) those kids are going to have a tough time paying the butcher, the baker, the banker and all sorts of makers.

I must conserve my principal. Twaddle! Your goal should be to conserve your purchasing power, which is what an experienced money manager can do for you. Inflation is deadly. It鈥檚 not what you earn on your money that matters; it鈥檚 what you keep over and above inflation that really counts. You must recognize that 鈥渞eal inflation,鈥� not the 1 percent humbuggery Washington feeds us, is certain to explode in the coming three to four years.

Social Security and my company retirement plan will be enough. Nonsense! It鈥檚 suicide if you rely on Social Security and Medicare to be as generous to you as it was to your parents. Social Security and Medicare are trillions of dollars in arrears with no solution except the old saw 鈥� higher taxes and lower benefits. And you can鈥檛 count on your company retirement plan either. The future performance of the stock market will hardly match the vigor of its past performance. The stock market has decimated most retirement plans, and many corporations are canceling current plans and replacing them with cheaper benefits. Many Americans in their 40s and 50s will be left swinging in the wind.

There is security in my home equity. Hogwash! Home prices don鈥檛 always rise. And the past two years are a grim reminder of that. But when home prices do rise, so do most other living costs. And after you鈥檝e used up your savings, you can鈥檛 sell your home one room at a time and dine off the proceeds. And if you sell your home using the proceeds to move to smaller quarters, you鈥檙e essentially downgrading your standard of living.

Most Americans don鈥檛 take retirement seriously because we believe we can rely on Social Security, company retirement plans and the equity in our homes. Well, Social Security/ Medicare is bankrupt, retirement plans have been pummeled by Wall Street鈥檚 cupidity and home prices will continue to flounder like a fleet of sinking boats. Retirement is now a life-or-death decision. We must take a continuous and assiduous interest in our retirement future because the next 20 years will create dynamic social and economic changes that will knock the socks off our feet. It isn鈥檛 going to be pretty, and there won鈥檛 be a second chance if you fail to take an active role in your retirement future.

Address your financial questions to Malcolm Berko, c/o The Daily Journal of Commerce, P.O. Box 8303, Largo, FL 33775, or e-mail him at [email protected].
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