2 Signs You're at Risk of Running Out of Retirement Savings

There's a reason so many older Americans are afraid to tap their nest eggs once retirement rolls around. After working so hard to build retirement savings, they're worried about running out of money in their lifetimes. And if these signs apply to you, it means you may be at risk of having that happen.

1. You don't have a withdrawal strategy

If you kick off retirement without a plan for tapping your nest egg, you may indeed end up running out of money eventually. A better bet? Work with a financial advisor to come up with a withdrawal strategy that's suitable for you based on your needs and goals. Or do your own research and come up with a strategy yourself.

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You may want to use the 4% rule as a starting point. The 4% rule states that you can withdraw 4% of your IRA or 401(k) balance your first year of retirement and adjust future withdrawals in line with inflation. If you do this, your retirement savings are likely to last for 30 years.

This doesn't mean you should stick to the 4% rule, though. You may find that a 3% withdrawal rate makes more sense for you -- say, because you retired on the early side and need more than 30 years of income from your portfolio.

Or it may be that you can withdraw more than 4% because of the way your assets are invested, or because you retired late. It's important to customize a strategy rather than follow the 4% rule simply because it's popular.

2. Your investments are too conservative

It's generally wise to scale back on stocks once you retire to limit risk in your portfolio. But that doesn't mean you should dump stocks completely, or even to a large degree.

The 4% rule assumes that you have a fairly equal mix of stocks and bonds in your retirement portfolio. But if you have 90% of your assets in bonds and cash and only 10% in stocks, your portfolio may not be able to generate enough income to allow for a withdrawal rate anywhere close to 4%. And in that case, you could put yourself at risk of depleting your savings too soon.

Before you reduce your stock exposure too heavily, sit down with a financial advisor or do some research to come up with a reasonable allocation. Keeping 50% of your assets in stocks may not fall within your comfort zone, and you do need to be able to sleep at night without constantly worrying about your investments. But you may find that a portfolio that's 30% stocks, for example, is a reasonable compromise.

After working so hard to build retirement savings, you don't want that money to disappear at any point in your lifetime. By creating a withdrawal strategy that's specific to you and taking on at least some risk in your portfolio, you may be able to avoid that fate.

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