Think Running Out of Money Is Your Biggest Retirement Risk? The Opposite Could Happen.

There are plenty of aspects of retirement to worry about -- health issues, feeling bored, and lacking company once you're no longer going to an office every day. But if there's one specific worry that can be very hard to shake, it's the fear of running out of money.

A good 71% of working Americans say they expect to be reluctant to spend their retirement savings once their careers end, according to a recent Allianz survey. And that's understandable. But it's also a big problem.

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Not spending your money isn't the answer

If you spent your entire life budgeting carefully and saving for retirement consistently, it's easy to see why it's not so easy to make the jump into spending your nest egg down. But one thing to try to remind yourself is that the whole reason you spent those years saving was to be able to enjoy retirement.

Think about it this way. During your working years, you probably saved for things other than retirement.

You may have saved for a new car, a vacation, or new furniture. Just as you may have made those purchases without guilt at the time, so too should you feel comfortable spending your IRA or 401(k) to support yourself once you've not working anymore.

The difference, of course, is that with your IRA or 401(k), you may be talking about millions of dollars. But you don't have to spend all of it at once (and you definitely shouldn't).

What you should do is create a budget that outlines your core expenses. Then, think about ways you can make retirement more enjoyable. If that means joining a country club, going out to dinner twice a week, and traveling every other month, you should absolutely do those things if your savings can support them.

To put it another way, your goal in retirement shouldn't be to keep saving. It should be to finally start spending, albeit with a plan.

How to avoid running out of money too soon

If a fear of depleting your retirement savings in your lifetime is causing you to underspend, it's important to address it rather than continue to deny yourself access to the money you worked hard to accumulate.

First, come up with a safe withdrawal rate based on your retirement timeline and investment mix. If you retired in your 60s and have a fairly even mix of stocks and bonds, you may feel comfortable using the popular 4% rule. If you're invested a bit more conservatively or retired on the earlier side, a 3.5% withdrawal rate may be more appropriate.

Once you establish a withdrawal rate that's appropriate for your nest egg, you should feel comfortable sticking to that plan. And that may lead to more annual income than you're currently allowed to access.

In addition, make sure to have a backup plan in case the market crashes. Keeping a few years' worth of living costs in cash allows you to leave your portfolio untouched during a market downturn. And if you don't have to sell assets at a loss to generate income, you're less likely to deplete your savings prematurely.

It also helps to take a flexible approach to spending if there's a steep market decline followed by a slow recovery. In that situation, spending as little as possible for a year or two could make sense. But there's a difference between limiting your spending due to market conditions and limiting your spending in general because you're worried about running out of funds over time.

It's not an easy thing to go from saving money for decades to spending the money you've accumulated. But if you worked hard to build a nice IRA or 401(k) balance, you deserve to enjoy that money and use it for what it was intended for. So if you're having trouble doing that, come up with a strategy that helps you feel more comfortable with the idea of finally becoming a spender.

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