I have rectal cancer and my tumor was 4 mm above my anal sphincter. My surgeon was able to remove the tumor and the part of my rectum that the tumor was in and construct a J-Pouch from my colon. I have a temporary ileostomy while my colon heals. If the tumor is far enough away from the sphincter, you don't have to have a permanent bag. I'm not sure how familiar you are with your anatomy there but the sphincter is what holds the stool in your colon until you want to go to the bathroom.
The J-pouch surgery builds a little pouch to take the place of the rectum. Patients usually have to move their bowels about 4 times a day but you do not have to have a colostomy permanently.
If you do have to have a colostomy, it's not as bad as it first seems. I couldn't believe I had to have an ileostomy, even temporary. I had no idea how I was going to live my busy lifestyle. To be honest, I forget half the time that I have it and I can do all of my normal activities. You just have to have a good attitude about it.
Be sure to talk with your doctor about your options and get a second opinion if necessary. There are still a lot of doctors that are still making a huge incision, taking out the rectum and giving patients colostomies. I have a very small incision from my surgery (like a C-Section) and a couple little scars from where they inserted the instruments. I'm not sure where you live but you may need to go to a larger hospital to have this type of surgery.
There is a lot of information on the internet about the J-Pouch. I just want to warn you that some of the support sites are depressing. I have come to the conclusion that the patients that are doing really well with it don't need to be in a support group and are living life to the fullest and don't have time to be on sites. The sites are full of complainers and people that didn't do well. I had the chance to speak to 4 patients my surgeon worked with and they are all very happy with the outcome and don't give it a second thought.
Good luck in your journey and let us know how you are doing and what decisions you have had to make. There are several of us with colonrectal cancer going through chemo together right now and we can all share our stories and experiences with you.