Afraid to Raid Your IRA in Retirement? Do These Things

Some older people have the problem of entering retirement without a lot of savings to tap. But even if you have a robust IRA or 401(k) balance, it doesn't necessarily mean you're all set for retirement. 

The reason? After spending decades growing your nest egg, the idea of spending it down can be terrifying. And whether you're retiring with $100,000 or $1 million, you may be worried about running out of money in your lifetime.

A 2018 study in the Journal of Personal Finance found that for 50% of retirees, the idea of a declining retirement portfolio balance brought them discomfort even if that money was being spent for its intended purpose. So if you're afraid to raid your retirement savings, you're not alone. 

Still, you don't want to let that money just sit around doing nothing for you. And at some point, you may be forced to take withdrawals from your savings in the form of required minimum distributions, so you might as well get used to the idea ahead of time. 

But that doesn't mean you can't take steps to alleviate your fears, either. Here are a few things you can do if you're worried about tapping your nest egg.

1. Work with a financial advisor to come up with a safe withdrawal rate

So you've saved up a large chunk of money for retirement. Great. You may need that money to last 30 years, so it's important to take withdrawals carefully. And a financial advisor can look at your savings balance, bills, and other income sources, like Social Security, to help you determine how much of your savings to withdraw each year.

Your advisor, for example, might suggest a 3% withdrawal rate based on factors that include your lifestyle and age. If you have a $500,000 nest egg, that means you'd remove $15,000 a year. 

2. Work part-time to limit withdrawals

You may be eager to stretch your savings as long as you possibly can. If you're willing to work part-time as a retiree, you won't have to take as much money out of your savings.

Financial benefits aside, working can be a positive thing to do in retirement. A job can serve as a social outlet and a means of staying busy without spending money. It might also get you moving at a time in your life when you may be growing increasingly sedentary.

3. Pay attention to the market 

The optimal time to take withdrawals from a retirement account is when the stock market is up. Taking withdrawals when the value of your investments is down could lead to losses in your portfolio. 

Sometimes, retirees have no choice but to tap their nest eggs when the market is going through a rough patch. But if you can time your withdrawals to when your portfolio is up, you're apt to stretch your savings. 

This is part of the reason it pays to work with a financial advisor. That person can monitor the market as well as your individual portfolio to help you determine when to take your withdrawals.

It's natural to be nervous about the idea of raiding your IRA. But try to remember that the whole reason you sacrificed and saved throughout your caterer was to be able to enjoy retirement and cover your expenses without worry. So try your best to get on board with the idea of dipping into your savings, even if it initially falls outside your comfort zone.