By many accounts, millions of Americans engage in magical thinking and fail to accept the reality of what it will take to live comfortably in retirement. In fact, according to the Employee Benefit Research Institute's 2012 Retirement Confidence Survey, more than half of workers report that they have not even tried to calculate how much money they will need to live comfortably in retirement.

Without a doubt, many put their heads in the sand and either ignore planning for retirement altogether, or embrace overly optimistic myths. Let's look at some examples of "magical retirement thinking":

"I'll tap my home equity to pay for retirement": While your home's appreciation may strengthen your retirement picture, there are several cautions to keep in mind. First, gains on your home are taxable if they rise above the $250,000/person threshold. Second, you have to live somewhere, meaning you can only tap part of your equity. Third, you need to be able to be flexible about when you sell, and as we've experienced recently, real estate does not always increase in value.

"I can save later, when the kids are out of college": Time is not on your side, unless you are relatively young. If you wait until you are 50 to start saving for retirement, you will have to save at five times the rate of a person who starts at 30.

"I've saved some, but I'm a smart investor and my returns will save me": Better take a good look at how high the returns need to be. If you wait to age 50 to start saving, your return will have to be 25 percent a year, as compared to 7 percent a year if you started 20 years earlier.

"I'll die young, so I don't need to plan for 30 years in retirement": If you are married, it is very likely that one of you will live beyond 85. What if you are wrong and live beyond your money?

"I can downsize when I need to. I/we can live on less": This is another very popular idea. While it may be true for 80-plus-year-olds, the new retiree is likely to spend more in early retirement (age 65 to 75) than when he/she was working.

Working longer: A solution?

The best option is to start saving for retirement early. But if you are playing catch-up, working longer may be a solution to a shortage of savings. Working longer means more earnings, more retirement contributions, more investment income, no draw-down of assets and greater Social Security benefits. But there can be unexpected roadblocks: Health issues, corporate downsizing, loss of interest in work and family demands may hamper working beyond 65.

Therefore, when thinking about whether working longer will "work" for you, consider your "work expectancy," as well as your "life expectancy." If you can find a desirable job that can follow you into your sunset years, you may still be "golden."

Kerry Connell is an investment adviser with HTG Investment Advisors, an independent fee-only advisory firm in New Canaan. For information, call 203-972-8262 or visit