6 second take: Are you saving enough money for retirement? Are you afraid that you'll run out? Learn how to plan appropriately and reduce that fear.

Americans aren’t saving enough for retirement. And that’s causing them stress. It has become common to fear running out of money in retirement — and not just among those with scant savings.

Many people with seemingly adequate retirement savings are worried about their financial futures. Wherever you fall on the savings spectrum, whether scant or plentiful, there are options to take steps to address this fear.

Defining a Funding Shortfall

The pundits have misled us. We continue to hear about planning for the retirement of your dreams, complete with unlimited travel and top-shelf luxuries. This isn’t what most people should shoot for. Falling short of this somewhat absurd goal isn’t a shortfall.

A shortfall in retirement funding is when you are no longer able to maintain a lifestyle similar to what you were accustomed to during your working years.

And overspending during your working years doesn’t entitle you to overspending in retirement. Quite the opposite, in fact.

There’s an oft-quoted target of needing 80 percent of your income in retirement. Perhaps, but not likely. Most people will need less. Eighty percent would be quite a luxury for the average person — a considerable increase in one’s standard of living.

Manage Your Retirement Savings Plan Start by Getting a Free Analysis

It’s not a horrible number to use. It’s a decent number for 20-somethings and perhaps 30-somethings to have as a goal. Shoot a little on the high side, get off to a good start.

But if retirement is near, that number is junk. This is because it has no basis in your personal situation. If you calculate your actual need and it comes close to 80 percent, you’re a rarity.

The Fear of Running Out of Money in Retirement: The Two Biggest Variables

Fear has a close relationship with uncertainty. When there’s an unknown that has an associated negative possibility, fear is likely to at least attempt an appearance. Retirement has two major unknowns that have negative potentialities: investment returns and health concerns.

Investment returns can only be accurately predicted when they’re nearly zero. As you move into greater potential for gain, you assume greater volatility and associated unpredictability. This is often a catalyst for fear, whether it’s a valid concern or not.

Health issues also tend to be somewhat unpredictable. We can improve our odds, but there’s still a lot of uncertainty, even when we’re diligent about our health. And this ties to the fear of running out of money in retirement because big health issues can have big costs.

Open a Health Savings Account to Lower Your Out of Pocket Medical Costs Lively HSAs are 100% Fee-Free

The Third Variable

We could have lumped this one in with the prior two and made it three. But it has characteristics that require us to view it differently.

The third variable is your expenses. While investment returns and health concerns will undoubtedly impact your retirement lifestyle, they are subject merely to your influence. Meanwhile, your expenses are subject to your control.

Changing your portfolio mix or improving your diet might or might not pay dividends in the future, but reducing your expenses is guaranteed to do so.

Paring down expenses produces guaranteed results. Within reason. For example, delaying necessary repairs or maintenance may increase costs, not reduce them. You gotta think things through.

Needs vs. Wants

We typically begin retirement planning by looking at what we want. This may set us up for disappointment. We should begin by looking at what we need and considering how that fits in with our resources.

Traveling extensively is more likely a want than a need. Same with a second home or wintering in Florida with everyone else. There are some things you needto be able to do to maintain a comfortable standard of living. There are also additional things you may desire to do. They’re not the same.

There may be resources for some of the wants, but rarely for all of them. That’s okay. Retirees often find that what they thought they wanted and what they actually prefer to do aren’t the same. But if it’s a challenge to make a go of things financially during your working years, it may be unrealistic to think retirement will be easy street.

Get Matched With a Financial Adviser Most Suited to Your Unique Needs Maximize Your Retirement Efforts Today

Controllable vs. Influence-Able Options to Reduce the Fear of Going Broke in Retirement

Since fear is associated with uncertainty, you can work to reduce fear by reducing uncertainty. Sometimes you have direct control over the outcomes, while other times you have the opportunity to merely influence them.

Controllable Options

You can directly control your regular and ongoing expenses in retirement. You get to choose how much you spend on clothing, food, and entertainment.

There are limits to how far you can change your expenses, but the option of living on less and still living comfortably is a widely available one.

You can also control when you retire. Even if you’re forced to retire. You can take a part-time job and delay full retirement or otherwise supplement your income to postpose spending your assets. That’s directly controllable.

Influence-Able Options

If you have time, you can invest more. Many people have told me that’s simply not possible in their case, then headed outside for a cigarette or went for a drink on their way home. It is possible. It may not be desirable, but you have to choose: luxuries now and cat food later, or some sacrifice now?

Investment returns and health concerns are influenceable. You can alter potential outcomes with some degree of success, but not absolutely. You’ll continue to have risk, and you’ll need to manage it.

In the long term, investment returns are a function of risk. If you want high-level, long-term returns, you need to assume a degree of risk. Many people falsely believe they should remove or drastically reduce risk at the time of retirement. And certainly there are some modest portfolio changes that you can and should make as you prepare to begin withdrawals. But most people still need a growth orientation.

All too often, people reduce or remove the risk of investment loss by guaranteeing they’ll run out of money. The assets you need five or more years into retirement should generally remain in a growth position.

Health is also influenceable within reason. And managing the financial risks is as important as anything we can do to reduce our personal risks. It’s important to understand what your health insurance plans will cover and what they won’t. And it’s often important to address these gaps. Whether it’s in the form of a Medicare supplement or other health insurance — possibly long-term care or other asset-protection strategies — managing the financial risks of catastrophic health events is vital.

Compare Fiduciary Financial Advisors and Find Your Match Start for Free

Final Steps to Lessen the Fear of Running Out of Money in Retirement

Once you’ve controlled the controllable and managed the influence-able, it’s time to sit back. Life is going to have variables. Things will happen that you didn’t expect or anticipate. Hopefully you kept some flexibility in your planning to deal with surprises.

But at some point, it’s okay to acknowledge you’ve done your best, and that’s good enough. You can’t eliminate risk. You can’t eliminate uncertainty. But if you’ve done your best, you don’t need to lose any sleep over it, either. Your best is the best you can do. Now you just need to relax, monitor, and adjust as necessary.