For the past twenty years we have had thousands of financial experts trying to work out how much a retiree could safely spend each year to ensure that they don't run out of money. Yet, while the fear of a “lack of money” remains a major obstacle to retirement planning, most people state that they have no idea what their retirement needs might be, and confess that they have very little knowledge about the entire subject.

Great news! The results are in; we now have a much better grasp of all the risks involved.

This is what a sensible strategy may look like though the problem here is that for many of us “sensible” just won't cut it. Here's what you do not want to do; reducing your portfolio after retirement is a treacherous mistake made by too many retirees - after all, none of us know how long we are going to live.

Taking this uncertainty into account most experts will typically suggest one of these two solutions. First, you could set a limit on your initial portfolio withdrawal rate to somewhere between 3% or 4% per year, that equals $3,000 or $4,000 for every $100,000 you have saved. This would be well below the 5% and 6% withdrawal rates that used to be advocated. William Bernstein, an investment advisor in North Bend, OR said: "If you take out 5% and you live into your 90's, there's a 50% chance you will run out of money." This all sounds wonderful, but here's the next problem: the typical household in America today, headed by a 55-64 year old, will have less than $90,000 in savings so a 3% or 4% withdrawal rate is just not enough.

The second solution often advocated by financial advisors, for retirees with modest savings, is to buy income annuities. This normally involves handing over your money to an insurer; in return you receive a healthy-sized check every month for the rest of your life. You can of course also receive a very handsome stream of lifetime income by delaying your Social Security until you reach your late 60's. Many experts will tell you to use savings to pay for your early retirement years. This is very prudent. The real issue here is most of us don't really like the idea of delaying our Social Security or buying income annuities, because we fear we may not live long enough to reap the benefits.

No-one is claiming that the two-act retirement plan is ideal, but if you are short on savings the second solution will give you a reasonable source of income. You get to leave your heirs a decent inheritance should you die before you reach the age of 85. If you are lucky enough to live longer than that you should be able to live comfortably enough.