Though many seniors look forward to leaving the workforce and enjoying the laid-back lifestyle retirement is said to offer, underlying financial concerns can mar this otherwise exciting milestone. Such may be the case for the 72% of Americans within five years of retirement who are overwhelmed by the notion of running out of money during their golden years, as per Schwab research. If you have similar concerns, here are a few steps you can take to mitigate them -- and ensure that you don't wind up cash-strapped at the wrong time.

1. Know your costs

Many seniors assume their spending will decrease dramatically once they stop working. But once you really start thinking about the expenses you're liable for during your working years, you're likely to realize that many of those bills will still exist in retirement.

Older woman holding document while older man looks on with worried expression


Even if your home is paid off, you'll need to maintain it, make repairs, keep up with property taxes, and cover homeowners insurance. You'll still need a car to get around town, even if you're no longer commuting to work, and you'll continue to need food, clothing, heat, water, electricity, cable, phone service, and the many other expenses workers require.

In fact, some of your expenses, like healthcare, may even go up in retirement, so if you want to avoid a scenario where you run out of money, take the time to map out an accurate budget that reflects the bills you're likely to face. If you're relatively close to retirement, you should actually have a pretty realistic grip on what your expenses will look like. From there, you can make choices -- like working longer, if need be -- to ensure that you go into retirement with adequate cash reserves to cover your costs.

2. Boost your savings

The more savings you have going into retirement, the less likely you are to run out of money later in life. While there's no single savings number that guarantees you won't experience cash flow issues during retirement, as a general rule, it's wise to wrap up your career having amassed 10 times your ending salary. If you haven't yet reached that milestone, ramping up your savings is a good way to buy yourself some added financial security.

Let's imagine you're 62 years old and want to retire in five years. Let's also assume you earn $80,000 annually, and have $400,000 in savings. If you were to extend your career so you wind up working until age 70, and max out your 401(k) at the current annual limit of $26,000 for older savers, then you'd wind up with about $840,000, assuming your investments generate a 5% average annual return during those eight years, which is a reasonable return for a portfolio with an even stock/bond split.

Of course, not everyone can max out a 401(k), but if you make an effort to boost your savings by some degree, and are also willing to extend your career, you can make that money last longer.

3. Establish a smart withdrawal strategy

Withdrawing funds recklessly from your retirement plan is a good way to deplete your savings prematurely. A better bet? Put together a withdrawal strategy that takes factors such as your life expectancy, expenses, and investments into account.

For years, financial experts have stood by the 4% rule, which has you withdrawing 4% of your savings balance your first year of retirement and then adjusting subsequent withdrawals for inflation. Under this setup, your savings are, conceivably, supposed to last 30 years.

But what if you need your savings to last more than 30 years (say, because you retire young and have great health and a family history of longevity)? Or what if your savings are invested very conservatively, and as such, won't generate the same growth the 4% rule is based on? In those cases, a 2% or 2.5% annual withdrawal rate may be more appropriate for you. The point, either way, is to come up with a system that aligns with your specific circumstances, needs, and goals.

The idea of running out of money in retirement is a scary one -- but it doesn't have to keep you up at night. Be realistic about your expenses, pad your savings as much as you can, and develop a customized withdrawal strategy to help ensure that your nest egg is there for you when you need it.