My fellow Fools and I spend a lot of time talking (and writing) about the process of saving for retirement. It's a confusing, challenging endeavor for many -- if you're new to investing, or don't have a lot of exposure to the basic concepts, picking your way through a 401(k) plan's options or setting up an IRA can be daunting. For some, it's so daunting that they don't do it, or put it off indefinitely, letting years slip by before they start saving.

But happily, plenty of people do get it. They've put in the time to learn how to invest well, and they've found ways to save more of what they earn. Combined with their discipline to contribute to their retirement plans and IRAs year after year, they end up with a nice nest egg as they approach retirement.

Great! Now what?

Shifting from saving to spending
Obviously, drawing down that nest egg requires a different mindset than the one you had while you built it up. While you're building your nest egg, the ups and downs of volatile stocks like II-VI (NASDAQ:IIVI) don't bother you too much. As long as the fundamentals remain strong, and the overall trend is going in the right direction, who cares if the stock -- or the market -- is in a funk?

But when you're planning on spending that money, suddenly that funk looks like a problem. Suddenly the ups and downs of your nest egg's overall value seem to mean the difference between a secure retirement and going broke early. The temptation is strong to shift the whole thing into a money market fund -- or just buy an annuity. Sure, a money market's yield is low, but at least your nest egg will still be there when you need it. And the fees on an annuity can be outrageous -- but at least you're guaranteed an income stream. Right?

You know what I'm going to say: There's a better way.

The better way
You may know that most experts recommend that you limit your withdrawals to about 4% of your retirement fund's total value every year. That's good advice. You may also know that some of us recommend that you keep a sizable portion of it invested in stocks -- all the money you won't need for at least five years should be in stocks, in part to help you keep up with inflation.

But managing that stock portfolio will require -- again -- a different mindset than the one you had while you were building it in the first place. In a recent issue of the Fool's Rule Your Retirement newsletter, advisor Robert Brokamp examined this question in detail.

Sure, you'll still be invested in stocks, and some of the same thinking still applies. But there are some big differences.

If you were still working and saving back in the late 1990s, you could afford to take some big risks on companies like BEA Systems (NASDAQ:BEAS), E*Trade (NASDAQ:ETFC), Inktomi, and InfoSpace (NASDAQ:INSP), hoping that one or two would work out well over the long haul. But as Robert's article notes, once you've saved all you can, managing your nest egg requires more of a conservative approach.

Does that mean you have to dump all your growth stocks and hunker down with traditional defensive plays like utilities? Not at all. Among other things, it means spending some time looking at blue chips like Wyeth (NYSE:WYE) and dividend-paying stars like Reynolds American (NYSE:RAI) instead of throwing all your spare cash into the next great wonder stock. It means being sensible, rather than adventurous, as you'd expect -- but it doesn't mean foregoing risk entirely. And it means being "sensible" in some ways you probably haven't thought of.

If you'd like to read Robert's full article, which ran in the December 2007 issue, help yourself to a complimentary one-month guest pass to Rule Your Retirement. The pass will give you full access to the most recent issue, all back issues, our special members-only discussion board for your questions and ideas, and a unique set of planning tools to help you create your own plan for retirement. It's yours for 30 days, without obligation to subscribe.

This article was first published on Dec. 6, 2007. It has been updated.

Fool contributor John Rosevear loves this retirement-planning stuff, which he admits probably makes him a little weird. II-VI is a Hidden Gems recommendation. The Motley Fool's disclosure policy is a firm believer in balancing risk with reward.