When asked about financial worries, most Americans put retirement savings near the top of their lists. While close to half of older workers claim running out of money during retirement is their biggest fear -- worse even than death -- worry isn't necessarily translating into action. 

Almost 40% of all workers have no retirement savings at all, and around 8 in 10 Americans have no idea how much money they'll need to retire. Even those who are saving are likely saving far too little

One big reason so many struggle with retirement savings is that a lot of what we think we know about saving for retirement no longer applies. In fact, here are six key facts about retirement savings you probably didn't know.

Calendar with circled date reading Time to retire

Image source: Getty Images.

1. Saving 10% of your income probably isn't enough

Conventional wisdom says you'll have enough to retire if you save 10% of your income. Unfortunately, this 10% rule no longer makes sense.

The fact is, we're living longer, investment returns are expected to be below historical averages, and healthcare costs are rising faster than inflation. This means you'll need to save around 15% to 20% of your income for retirement.

Of course, few are doing this -- average contributions to a 401(k) were just 6.2% of income in 2016, according to Vanguard's How America Saves. To make sure you're on track, calculate how much income you'll need based on your projected retirement budget and other sources of income, like Social Security. You can use an online calculator to determine how much to save monthly, and can look for ways to cut your spending -- like canceling unnecessary subscriptions, or meal planning to avoid waste -- so you can make the necessary contributions.    

2. $1 million won't go as far as you think it will

Almost 40% of Americans think they'll need $1 million to retire. Sadly, even with seven figures in the bank, you may not have enough to live on. In 13 U.S. states and in Washington D.C., $1 million is projected to last less than 20 years, according to an analysis conducted by HowMuch. If you retired at 65, you'd be broke by 85 -- and if you live in a particularly expensive city, like D.C., your $1 million nest egg would be dwindled to nothing in just over 14 years. 

The fact is, if you plan to stay in a high cost-of-living area as a senior, you'll need retirement savings worth far more than $1 million. In San Francisco, for example, Go Banking Rates reports you need $110,000 annually to live comfortably. Assuming you rely on investment income to supplement the average annual Social Security benefit of $16,956.96, you'd need around $1.86 million in the bank to produce enough income, assuming a 5% yield.

If you plan to live in an expensive area as a senior, factor in costs of living when setting savings goals. If you're approaching retirement with too little saved, consider moving to a state where retirees can survive on less. Make this move ASAP so you don't spend too much struggling to stay somewhere you can no longer afford. 

3. The amount you can safely withdraw is smaller than you think

When estimating withdrawals as a senior, are you following the conventional wisdom that says you can withdraw 4% of your money every year without worrying about running out of cash? The fact is, the 4% rule is based on outdated information, and like the 10% rule, it no longer applies because of longer life spans and lower interest rates.  

To avoid running out of money, skip the 4% rule and consider alternatives. Use required minimum distribution rules to estimate withdrawals based on life expectancy, or calculate the amount of money you'd need to buy an annuity to provide your desired retirement income. If you like the percentage formula, simply lower the threshold for safe withdrawals, and live by a 2.5% to 3% rule. 

4. You're going to spend more than you expect as a senior

You'll spend less as a senior, so you only need to replace about 80% of the income you earned when working -- right? Chances are good you've heard this financial advice, and even may be basing your retirement savings goal off it. 

The fact is, this is also based on incorrect assumptions. Close to half of all households actually spend more after retirement. Some of this spending comes early in your retirement years while traveling, spoiling grandkids, or indulging in hobbies. Unfortunately, a lot of non-optional spending occurs later in life in the form of high medical bills. Seniors 65 and up had mean healthcare expenditures of $5,994 in 2016, and seniors who require many prescription medications may spend as much as $350,000 on medical care alone during retirement. 

To make certain you don't end up broke because of unexpectedly high spending, assume you'll need at least 100% of current income during retirement -- and consider opening a health savings account to build a separate fund for healthcare expenditures. 

5. You may be required to take money out even if you don't want to 

If you've adjusted your savings to have a big nest egg, you may have a lot of money in your retirement accounts. While your plan may be to keep this money invested, this isn't always possible. 

The fact is, depending upon the type of retirement account you have, once you reach age 70 1/2, you're mandated by law to take required minimum distributions (RMDs) to avoid penalties. The specific amount you must withdraw varies based on age and account value. RMDs generally must be taken by December 31 to avoid huge penalties equal to half the amount you were supposed to withdraw. 

To avoid a tax penalty, learn the rules for required minimum distributions as soon as you near retirement age. You can also use the calculator in this article to determine what your RMDs will be. 

6. You'll probably owe a big tax bill 

Unless you have a Roth IRA or a Roth 401(k), your retirement accounts were likely funded with pre-tax contributions. Unfortunately, while you got tax breaks for these accounts when making investments, you don't get favorable treatment from Uncle Sam when withdrawing money. 

When you make withdrawals after retirement age, the withdrawals will be taxed as ordinary income. If you take out $10,000 and you're in the 25% tax bracket, you'd pay $2,500 in taxes. 

The fact is, however, your tax bill may be bigger than expected. If withdrawing from your accounts bumps your income above $25,000 as a single person or $32,000 as a married couple, you'll go from paying no taxes on Social Security benefits to being taxed between 50% to 85% of your benefits. This could mean a big tax increase.

Keeping tax costs down can be complicated, but one option is a Roth IRA conversion. Converting your retirement savings to a Roth IRA would require you to pay taxes during the conversion year, but future withdrawals would be tax free. 

Know the facts before making your plans

Now that you know the facts about retirement savings, it's time to stop worrying about retirement and start making plans for a secure future.  Get started today by increasing your retirement account contributions and making sure you're taking advantage of tax breaks that help you to save.

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