The scariest thing about retirement savings and how to protect yourself

By Melissa Rudy

The No. 1 fear about the retirement nest egg is that it may not be big enough to provide adequate lifetime income. A recent AARP survey of people ages 44 to 75 showed a whopping 61 percent are more afraid of running out of money than they are of dying. What can you do to help prevent this fear from coming true?

 

In an unpredictable economy, it's impossible to determine with any degree of certainty exactly how much money you'll need or how long you'll need to rely on your retirement savings. But even with all of the unknowns, there are things you can do to help make your savings go farther:

  • Work longer. Delaying retirement by just a year can add 7 or 8 percent to your Social Security benefits, according to U.S. News and Yahoo Finance. It will also boost your 401(k), while allowing your savings to continue to grow tax-free for a longer period of time.
  • Live modestly. Stick religiously to the 2 to 4 percent rule. Other financial advisers may tell you that it's safe to withdraw 5 or even 6 percent from your retirement savings each year, but especially in a turbulent economy it's best to take no more than 4 percent--if you can manage it--to ensure that your retirement savings will last longer.
  • Save smart. For cash accounts, avoid bank fees and shop around for the best high-interest checking and savings accounts. Every dollar saved on fees is another dollar you can add to your savings--and the more interest you're earning on your regular accounts, the faster those savings will grow.

What if the dollar continues to fall?

Concerned about the falling value of the U.S. dollar affecting the worth of your savings investments? As long as you retire in the U.S., the value of the dollar on the world market should have little impact. The best preventive measure is to make sure your savings are diversified in global investments, such as international stock index funds.

How will inflation affect retirement savings?

Inflation is a concern for many who are looking ahead to their retirement, and again, it's nothing anyone can predict. Inflation gradually steals money from your savings--not through bank fees, but by gradually reducing the value of your money and decreasing the amount you can buy with the same dollar.

There are several ways to protect your savings from inflation, such as laddering in CDs, investing in bond index funds, equity funds, or inflation-protected securities. The best way to learn about these kinds of investment vehicles is from your financial adviser or online savings experts.

Whatever your greatest fear might be about retirement, know that there are safe, simple strategies to help protect your savings and help ensure that they'll last as long as you'll need them--and even leave something behind for your loved ones.