Can you go broke in retirement?

With some careful planning and saving, you can ensure a comfortable retirement.
With some careful planning and saving, you can ensure a comfortable retirement.

You've saved diligently and invested wisely, and now you're ready to say goodbye to working life. Retirement is here! Careful planning is the key to a comfortable retirement, and that planning doesn't end when you leave the workforce. Now that you're living off of investments, savings and Social Security, it's more important than ever to watch your money carefully. If you manage your investments well and focus on living within your means, you're unlikely to go broke during retirement.

Before you give that final notice at your job, it's a good idea to sit down with a financial advisor to go over your budget, savings, investments, Social Security benefits and planned withdrawal rate. A good advisor can help you crunch the numbers and make sure you're ready to retire. He can also help you sort out a reasonable monthly budget based on the expected length of your retirement.

Now that you're relying more heavily on your investments, you're going to want to keep a much closer eye on them. The stock market has natural ups and downs, and you might want to look at moving more of your funds to conservative investments, or even a savings account, so you'll be able to weather those small financial storms. Also, you don't necessarily want to move your money just because a stock dips. Look at a company's long-term performance and try to decide if it's worth selling at a loss or if this is just a momentary blip. It's not a bad idea to check in with an advisor from time to time during retirement to look over your portfolio and make adjustments to it, as well.

It's important to manage your withdrawal rate to make those savings last. Sure, it's tempting to take out a higher amount each month, but make sure you're thinking about the big picture here. How long do you anticipate enjoying retirement? 20 years? 30? Sticking to a withdrawal of around 4 percent per year might feel overly frugal, but it will help ensure that you don't run out of money [source: Weston].

Next, let's look at how you can adjust your lifestyle to maximize your nest egg.