Here’s 1 ‘sneaky’ risk that’s destroying retirements in America — and how to deal with it before it ruins your nest egg, too

It’s not easy being a spender

Economic theory suggests that we should try to keep our level of consumption steady throughout our lifetime. Yet, studies have shown that we reduce our inflation-adjusted consumption in retirement. This is known as the ‘retirement consumption paradox.’

For those without enough retirement income, this may be out of necessity. But it’s more likely driven by fear.

Many retirees worry about running out of money: In fact, 63% of Americans are more worried about running out of money in retirement than they are of death. And the top concern for nearly seven out of 10 retirees is that they’ll outlive their assets.

This is a valid fear, given the uncertainties about health and longevity in your retirement years. For example, you may end up spending a lot of money on health care or, as is increasingly common, you may live into your 90s or beyond.

Despite this fear, nearly eight out of 10 retirees feel they have what they need (or more) for retirement. Yet, many still restrict their savings. So, how can you move from a savings mindset to a spending mindset and begin to enjoy your retirement?

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How to change your mindset

Knowledge is power, so first get a handle on your numbers. Be sure you have a full accounting of all your investments, pensions, Social Security benefits, annuities and any other sources of income.

Do the same for your expenses. Hopefully, you’ve spent some time tracking them in your preretirement years so you have a place to start. You’ll want to create a budget for your retirement years and then track your spending (using an app is a great way to do this) so you can adjust as needed.

With this knowledge in hand, you can determine how much you’ll need to withdraw from your investments. It’s possible to reasonably draw down the principal each year and still have your money last for decades.

One commonly used method for determining a sustainable level of withdrawals is the 4% rule, by which you withdraw 4% of your portfolio the first year and then 4% plus an adjustment for inflation each subsequent year.

Regardless of the plan you’ve set up, you’ll need to learn to trust it. Many don’t — only 31% of retirees make regular withdrawals from their portfolios. But this is the time of life to stop saving and start spending, so don’t be afraid to embrace this new mindset.

That doesn’t mean you shouldn’t be keeping an eye on your investments. Each person is different, and it’s worth consulting an adviser, but you’ll want to make sure your investments are serving your interests in retirement.

For example, you might want a more conservative portfolio than when you were in your 30s and 40s, but you also might want some potential for growth to weather inflation or help your savings last longer.

If you don’t have a pension, you may want to consider buying an annuity. An annuity is a contract with an insurance company in which you pay a lump sum up front and then receive payments for either a set period of time or for the rest of your life.

Some studies have shown that people with annuities spend more and feel happier in retirement. In fact, this is true of any source of permanent fixed income such as Social Security or a pension.

To be comfortable that you’ll better weather potential risks, be sure you’re properly insured. Property damage, travel incidents and health issues can be expensive shocks and can derail your retirement plans. Insurance can help mitigate some of the financial damage.

If you’re not sure where to start, a financial adviser can help you decide how much to withdraw from your savings to meet your retirement goals — which, in turn, can help you overcome your fear of withdrawing this amount.