Retirees ask, will I outlive my nest egg?

The most commonly asked question of folks nearing retirement is: "What is a safe rate of withdrawal from my nest egg?" Gone are the days of living on the interest while leaving the principal untouched. With low interest rates, conservative investors are forced to either limit spending or cut into principal every month.

Ask yourself how long your money will last if you continue to earn a low rate of return.

If your conclusion is that you'll be living on Social Security alone by age 80, then you have got to do something. The choices are the same for all: make more or spend less.

Financial experts have concluded that a safe draw down rate is about 4 or 5 percent of your nest egg. That means you are not likely to outlive your money if the amount you withdraw each year does not exceed 4 to 5 percent of the nest egg's total size.

It would take a nest egg valued at more than $2 million to safely provide between $80,000 and $100,000 of supplemental annual income.

Be aware, that when income experts make forecasts, they are talking about a diversified portfolio and not a conservative basket of low-yielding guaranteed accounts. Examples of asset classes could be as mainstream as U.S. stocks, or as far flung as emerging market debt instruments, with holdings like real estate, mortgage loans or tax free municipal debt in the middle. It's important to be sure that your withdrawal rate works for you and that you are realistic in forecasting total earnings from the nest egg.

Look at the other side of the coin - the debt side of your life. While a 3 percent mortgage rate may be the lowest in our lifetimes, it can feel like a high rate if you are only earning 1 percent on your savings. Serious consideration should be given to paying off the mortgage and saving the interest costs on the loan. The only way it would make sense to keep the mortgage unpaid is if you were willing to risk some principal to earn more than the cost of the loan.

Low rates could be with us for a while. Foreign investors are doing their part to help keep rates low by preferring our safe-haven currency over their own. This allows rates to drift lower as the demand for bonds exceeds the supply.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

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