How to make your retirement money last

Saving enough money to retire can be a tall order even for responsible financial citizens. And after you've diligently saved and invested your money, those assets must last for the rest of your life.

For most people, that challenge is a recipe for anxiety. Around 74 percent of working Americans worry about having enough money to live comfortably in retirement, according to a recent AARP study on financial security.

Planning your retirement budget

As usual when it comes to money, it's vital to start with a plan. Experts recommend making a retirement budget at least a few years before leaving work. 

Map out your projected expenses, factoring in that they may change once you leave the workforce. That may mean making changes to your spending habits. One way to cut down your financial burden is to pay off debt, like mortgage loans or credit card bills, before retiring. 

Essential spending, like utility bills or rent payments, should be covered by stable income like Social Security. Other expense can be covered using more volatile income sources.

"One big thing is to make sure that you have a good handle on your expenses and what you are actually spending month to month," independent financial adviser Daniel Patterson told CBS MoneyWatch. "A lot of people don't really have a good handle on how much they are actually spending, and they are kind of dependent on that paycheck coming in. We've seen people kind of have a freak-out moment. It's a very scary transition for a lot of people."

Which accounts to tap first

If you retire in your 60s, it may be best to pay your bills with cash or money from taxable investment accounts first.

That allows the money in your retirement accounts to continue growing tax-free, until you have to take required minimum distributions beginning at age 701/2. Once you reach that age, you'll need to factor in how taking distributions from those accounts may change your income taxes. 

Keep in mind that while distributions from traditional IRAs and 401(k)s will be taxed at the regular income tax rate, money withdrawn from Roth accounts will not be taxed (since you paid taxes on your contributions up front), and there is no required minimum distribution regardless of your age.

 Another approach is to take a small distribution from each account, to spread the tax burden out over time. 

"One of the things we often consider is that the ability to preserve the tax-deferred compounding of an account can be very valuable, because you still want to grow your money even when you retire," said Ken Hevert, senior vice president of retirement at Fidelity. "That is one thing that we talk to customers quite a bit about. They do want to make sure that they are utilizing the different accounts that they have in the right order."

How much can you spend? 

The "4 percent rule" suggests spending no more than that percentage of your investments in the first year of retirement. It does not apply to guaranteed income, such as Social Security or pension payments. 

Let's say you plan to need $75,000 per year to cover your basic needs in retirement, and you and your spouse have a combined monthly Social Security benefit of $3,600 ($43,200 per year). Following the 4 percent rule, that means having saved at least $800,000 when you retire, enabling you to withdraw $32,000 per year to meet that income gap.

You should be able to withdraw that same percentage, factoring any inflation changes, over the next 30 years or so.

Keep in mind, market fluctuations mean some years might be better than others for your investments. That's one reason experts recommend having a flexible budget plan and an idea of how much of your portfolio you will need in place a few years before you retire.

"It's not a hard-and-fast rule, however, the analysis and the research in the modeling we have done shows that if you start out withdrawing more aggressively than 5 percent, you increase the risk of running out of money fast," Hevert said. "We don't know what the market is going to do... the 4 percent takes into account both positive and negative markets."