3. Ignore other savings vehicles
If your job doesn't come with benefits, as is the case at many small businesses, then obviously, you're totally off the hook -- working well beyond your twilight years is virtually assured. After all, it's not like there are any alternatives for deprived employees or the self-employed, for that matter.
Delude yourself no further. You do have options. Take, for instance, the SEP-IRA or the individual 401(k) plan for the self-employed.
And don't forget the humble IRA -- IRAs allow workers to save up to $5,000 annually ($6,000 in 2008 if you're over 50), as long as they earn at least that amount.
And those who don't want to deal with tax-deferred savings vehicles have no options either, right? Clearly, if an account is not specifically designated for retirement, it really shouldn't be used.
"The younger generation is only putting money into a 401(k), if that. They don't know that there are taxable brokerage accounts or Roth IRAs that you can put money into," says Dallas-based Certified Financial Planner Chanc Woods.
With many investment and savings vehicles available, no one should feel limited to only one kind of account unless they see themselves bagging groceries at 85.
If they are actually contributing the maximum allowed annually to their 401(k) plan, up to $15,500 ($5,000 more for those age 50 or over), they might even be able to afford a round-the-world voyage on the Queen Elizabeth II once they kiss their jobs goodbye. But those who'd rather float on a rubber mattress when they're not punching the time clock can always set their sights lower.
4. Disregard taxes
Some people may wait to screw up their retirement. Though the process of not saving can last a lifetime, actual savings may not when it comes time to get a distribution from a tax-deferred account.
Lunt says that people typically think that now that they're retired, they won't have to pay income taxes anymore.
"Often people make incorrect assumptions about what their lives will be like in retirement," says Certified Financial Planner Paula de Vos, president of Synergist Wealth Advisors. "They think they will be in a lower tax bracket, but they may be in a higher one."
Unless your retirement savings have been invested in a Roth IRA or a Roth 401(k), distributions will be taxed as ordinary income. "That could be 25 (percent) to 30 percent less in retirement dollars that someone isn't expecting," says Woods.
Plus, he says, a lot of people feel that income tax rates now are the lowest they'll ever be. A look back in history proves that it's been higher most of the time. In the 1940s, the top marginal tax rate was 94 percent for individuals with taxable income of more than $200,000 (a lot of money in those days, true). But this just goes to show you that prospective retirees could be looking at paying higher rates than today's top rate of 35 percent.
Though they're completely unavoidable, taxes have to be considered when planning for retirement income. If you go to all the trouble of saving and then end up with less income than you expect, it can definitely ruin your retirement -- or at least put a damper on it.