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7 Ways to Quell Fears of Running Out of Money

David Ning

Transitioning from the accumulation to withdrawal phrase is tough for many retirees who have enjoyed seeing their net worth grow for decades. Some people worry excessively about running out of money. They may practice unnecessary frugality and miss the chance to enjoy what should be the most freeing time of their lives. Here's how to overcome the fear that you will outlive your retirement savings:

Get a single premium immediate annuity (SPIA). It's wise to be skeptical about any insurance products. But the guaranteed monthly income you get from an immediate annuity is the best way to reduce the fear of running out of money. By accepting that you will likely underperform a well-diversified investment portfolio and be unable to leave that portion of assets for your heirs, you are gaining the peace of mind that a monthly check will be delivered as long as the insurer stays in business.

Track your expenses and income to get a long-term trend. Gather a history of your expenses and compare it to the income your portfolio generates. This will help give you a good picture of how much money you need to pay for your expenses. Is your net worth really declining, as you fear, or are you just being too pessimistic?

Identify where you can cut if needed. By knowing your specific spending patterns, you can also come up with a plan to cut costs if market performance falls below your expectations. Remember that simple steps like cutting your cable TV bill can do wonders for your budget. Running out of money in retirement is actually rare for retirees who plan and track their spending, because most people start adjusting well before their stash depletes to zero.

Run different retirement calculators to see your chances of success. Many retirement calculators that are based on historical returns and inflation numbers will give you a good idea of where you stand. Some calculators will even allow you to calculate your chances of running out of money.

Consider waiting until 70 to receive Social Security. Another way to significantly increase the chances you won't run out of money in retirement is to delay collecting your Social Security checks. By waiting until you turn 70, you will receive much more per month. Sure, you might end up losing out because you die early. But if avoiding running out of money is your primary concern, having a higher check every month after you turn 70 is well worth the wait.

Realize that running out of money in retirement may not equal catastrophe. The reality of depleting your retirement nest egg may not be as disastrous as you think. The U.S. is still one of the better countries at taking care of its senior citizens. With Medicare, Medicaid, Social Security, and a progressive tax system, the government will lend more and more of a hand if your retirement income dwindles. Already, many of your fellow retirees are living solely on Social Security and still having a happy and comfortable retirement.

Recognize that retirement worries are normal. You aren't the first person to worry about running out of money, and you won't be the last. A moderate amount of fear is actually good since it will help prevent excessive spending. It can be helpful to worry about money as long as the fear isn't preventing you from enjoying a well-deserved retirement.

Retiring should be about being free from the daily grind. Do what you can to free yourself from money worries.

David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.

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