Are you basing your retirement plans on myths that make you afraid to save too much – and lead you to believe you won't need that much money anyway?  If so, you could be missing opportunities to start putting aside money early when you get the biggest benefit from compound interest and tax-free growth.

While tax-deferred savings plans do place barriers to withdrawing retirement funds, you can get to most of your money in an emergency. What's more, you have more options for tax-deferred savings than you may think – and you will probably need more money than you realize. Take time to separate fact from fiction; it's worth it to understand the truth behind these five myths.

1. Your retirement-plan contributions are locked in until you retire.

This simply isn't the case, though you may have to pay taxes and/or penalties for withdrawals from your IRA. Employer retirement plan contributions are more difficult to access; you can, however, borrow against your 401(k) or defined-benefit plan, although you will be expected to pay them back before you leave the company. In some cases, you may even qualify for a hardship loan, but be prepared to pay taxes and penalties if you do so.

"You should view the 10% early access penalty as a positive reminder to you not to touch this money. Remember, it is likely that when you reach your sixtieth birthday, you will still have at least a quarter century to live," says Lex Zaharoff, CFA, senior wealth advisor, HTG Investment Advisors Inc., New Canaan, Conn.

If your retirement money is in a Roth IRA, however, your contributions can be withdrawn at any time without tax or penalty (see How to Use Your Roth IRA as an Emergency Fund). 

2. If you contribute to a retirement plan at work, you can't also contribute to a traditional IRA.

This myth is really a misunderstanding of the income limit rules governing tax deductions for traditional IRA contributions. According to the IRS, if you have a 401(k) at work, your tax deductions for traditional IRA contributions may be limited (not prohibited) depending on your income. In 2017, for example, if you are married and filing your taxes jointly and your modified adjusted gross income (AGI ) is $99,000 or less, you may ask for a full deduction (up to your contribution limit) of your IRA contributions. 

3. You have to roll over your retirement funds into an IRA when you leave a company.

Contrary to popular belief, all retirement plans do not have to be rolled over into an IRA. In some situations, you can withdraw the funds or transfer them to another account. For example, if you're 55 or over and leave a company to retire, you can withdraw money penalty-free from the employer's 401(k) retirement plan. If, however, you have an IRA, penalty-free withdrawals aren't available until you are 59½. However, in either case, if you take that money and don't roll it over into an IRA or another company's tax-deferred plan, you will have to pay income tax on it. 

If you're under 55, you may also be able to transfer funds from your previous company's 401(k) to a new employer's 401(k) without penalty. Because this varies by plan, contact your plan's administrator for details on a tax-free transfer. You can generally also leave your money in your previous employer's 401(k). Top Reasons Not to Roll Over Your 401(k) to an IRA explains the details.

It's also important to note that if you have company stock in your retirement plan, you may get preferential tax treatment by transferring the company stock to a brokerage account instead of rolling it over into an IRA. Here's how it works: You withdraw the company shares from your account and transfer them to a taxable brokerage account, avoiding income tax on the shares' net unrealized appreciation (NUA).

4. You should never withdraw the principal from your retirement accounts.

"Don't touch your retirement savings" is good advice for members of the workforce diligently saving for the future. But, as noted above, if you're in a serious money crunch, you can violate that rule. It's no reason to not stash the maximum allowable money you can manage to save. Once you're retired, of course, you've reached the lifestage you've been saving for.

Financial advisors cite the well-known Four Percent Rule that, based on a conservative portfolio, retirees should withdraw no more than about 4% of their retirement savings per year in order for their money to last about 30 years. While this theory has been challenged – some experts believe 3% is safer in today's economic situation – it doesn't mean retirees should only withdraw the interest or investment income their savings have earned. The key is keeping track of your spending, and allowing extra room for medical (or other) emergencies, over an extended lifetime.

"Retirement best practice has evolved from 'interest only' investing into 'total return' investing. A diversified portfolio of stocks, bonds and money market instruments offers both interest plus the potential for longer-term growth from stock investments. Instead of just spending the 'interest' each year, you withdraw some pre-determined portion (often 4 or 5%). Sometimes that could exceed the annual returns, but, over time, growth of the entire portfolio should exceed the annual withdrawals. This way, the portfolio can continue to grow in value and so can the annual withdrawals. Over decades, this should protect the buying power of your portfolio and keep better pace against monetary inflation," says Dan Danford, CFP®, Family Investment Center, Saint Joseph, Mo.

5. You'll spend less money when you retire.

For many years financial planners have advised clients to expect to spend about 85% of their annual working income in each year of their retirement. However, your actual retirement costs may be more, depending on your healthcare costs, hobbies and how long you live.

Healthcare costs for an average couple retiring at age 65 in 2017 are projected to be $404,253 during their retirement, according to a HealthView Services report. "People often don’t have enough wiggle room in their budget for medical expenses. It doesn't always mean something terminal or horrible – take dental expenses!" says Marguerita Cheng, CFP®, RICP®, chief executive officer, Blue Ocean Global Wealth, Gaithersburg, Md.

If you plan to travel in the early years of your retirement, your vacation and travel expenses could be many times greater than they were during your working years. So don't be too optimistic when deciding how much you need to have in the bank before you stop working and start sleeping late – or too optimistic about your taxes: "I think the biggest myth I hear is that you will be in a lower tax bracket," says Allan Katz, owner and founder of Comprehensive Wealth Management Group, LLC, Staten Island, N.Y. "Between pensions, Social Security, investment income and retirement account income, that isn’t always the case."

The Bottom Line

Don't fall for retirement myths. Plan for your future by doing your own research using reputable government, education and finance websites along with trusted print literature and financial advisors. Don't be afraid to save as much as you can manage tax-free, knowing that your retirement funds aren't necessarily locked away until retirement.