Running out of money in retirement is a major concern among men and women alike. But because females tend to outlive their male counterparts, their chances of meeting this unwanted fate are even greater. In fact, 42% of women think they're at risk of depleting their nest eggs by the time they turn 80, according to a new study by Merrill Lynch and Age Wave. The question is: Are they worrying too much? Or are those fears likely to materialize?

Most women fall short on retirement savings

There's no magic savings number that guarantees a lifetime of income for retirees. Some seniors, for example, might get by on $600,000, while others with $2 million might blow through their nest eggs before they turn 75. But according to the aforementioned study, the typical retirement costs $738,000, yet only 9% of U.S. women have $300,000 or more saved up. It's also worth mentioning that other data points to the average American's retirement costing $828,000 all-in, or $46,000 a year, which reinforces the fact that a nest egg of under $300,000 isn't going to cut it.

Closeup of woman deep in thought


Now to be fair, there's a difference between having less than $300,000 in your 30s or 40s and having that same balance in your 50s or 60s. For a woman mid-career (or a man, for that matter), $300,000 is actually a pretty impressive sum. But for an older worker with limited time to boost that figure, it could spell trouble in retirement. That's because when we apply a 4% annual withdrawal rate from savings, which has long been the standard, to a $300,000 sum, we arrive at a yearly retirement income of $12,000. Even when we add in another $17,000 in Social Security benefits, which is roughly what the average recipient collects today, that's still only $29,000 a year of retirement income.

To make matters slightly worse, that $29,000 may not be available free and clear of taxes. Unless those savings are held in a Roth-style retirement plan, the IRS gets a cut upon withdrawal.

Therefore, when we think about the 42% of women who are terrified of depleting their nest eggs by 80, it's pretty clear that those fears aren't unfounded. After all, if a woman retires at age 67, needs $46,000 a year to cover her expenses, and collects $17,000 of that from Social Security, that requires a $29,000 annual withdrawal from savings. If we divide a $300,000 nest egg by $29,000, we come to about 10.3 years.

Of course, that's an imperfect calculation, because it assumes zero investment growth during that time. Even with a conservative investment style, that nest egg could easily see a 4% return or higher, which would work to lengthen that depletion period. But some people, once retired, refuse to put their savings in anything other than cash, so it's conceivable that the above computation holds water to a certain degree. It's also easy to see that running out of money by age 80 is a distinct possibility for women (or men) with limited funds socked away.

Making up for lost savings

If you're an older female with a not-so-stellar nest egg, you should know that you do have options for improving your financial picture in retirement. For one thing, aim to work longer. Not only does doing so offer potential health benefits, but it affords you an opportunity to keep stashing money in a retirement plan rather than do the opposite -- make withdrawals. Currently, workers 50 and over can contribute up to $24,500 to a 401(k) and $6,500 to an IRA on an annual basis. Work five extra years while maxing out the former, and you'll be sitting on an additional $122,500, and that's not taking investment growth into account.

Another benefit of working longer is that it might allow you to hold off on filing for Social Security past your full retirement age, which, depending on your year of birth, is 66, 67, or 66 and a certain number of months. The advantage of waiting on Social Security is that you'll snag an 8% boost in benefits for each year you delay past full retirement age up until age 70. Therefore, if you'd normally be eligible for $1,400 a month at age 67, working and waiting until 70 would raise each payment you collect to $1,736. That's an additional $4,032 per year, which changes the above calculations for the better.

Finally, you might consider the option of working part-time in retirement, whether it's consulting in your former field or starting your own business. The benefit of doing so is that you'll not only earn money, but avoiding spending money by having a means of occupying your time.

Outliving your savings is a legitimate fear, so if you're worried your nest egg isn't up to par, map out a plan to address that shortfall. Otherwise, your worst nightmare may very well become a reality.