Despite their best efforts to save, sacrifice and limit their living expenses, retirees often live out their golden years with a fear of running out of money.

Falling interest rates and fierce markets have only inspired more anxiety among senior citizens and near retirees hoping to live off the interest earned by their savings and investment portfolios.

"There's no doubt these market conditions are weighing on retirees," said Tim Buggy, a retirement planning specialist at AXA Advisors, Downtown. "One of their biggest fears is outliving their assets."

Many people who have left the work force have probably realized their fixed income investments aren't yielding as much income as they expected, and if they need to close that gap by selling other investments at lower prices they will damage their long-term wealth and worsen the problem.

"Retirees today are different than in prior years," Mr. Buggy said. "Today, we get 401(k)s while our parents are living on pensions guaranteed for life."

Thomas J. Mackell Jr., chairman of the board of directors of the Federal Reserve Bank of Richmond, recently authored the book "When the Good Pensions Go Away," which examines the wide-ranging consequences of shifting the retirement risk from employers to employees.

He said the country had witnessed over the past 25 years the deterioration of retirement income security for retirees and it has become more dramatic with the onset of the baby boom generation, which consists of some 77 million people who face retirement during the next 10 to 15 years or so.

"You lay on top of that the health-care crisis in this country, which is of mammoth proportions, and whatever savings retirees have will ultimately be emasculated by the need to pay for health coverage in their aging and potentially ailing years," Mr. Mackell said.

"Historically, every generation has prided itself on leaving behind a better condition than they inherited when they were born," he said. "This will not be the case for the next generation, largely because of the loss of pensions."

People are living longer, and because many people do not know how to determine if their money will carry them through old age and chronic illness, financial worries can hinder their ability to enjoy the carefree retirement they hoped to achieve.

According to the Society of Actuaries, a single female has a 62 percent chance of living to age 85. A single male has a 49 percent chance of making it to age 85. A husband and wife have an 80 percent chance that one of them will live to age 85 and a 58 percent chance one of them will reach 90.

The need to increase or maintain their standard of living often causes retirees to fall prey to potentially risky sales pitches for investments that pay higher yields than are generally available.

"For most investors who are income-oriented investors, the most valuable products for them will be well-diversified bond funds," said Robert M. Kowit, a senior vice president with Federated Investors, Downtown.

"That will be the best environment to preserve their principle and provide a better-than-average income, and possibly much better than average."

Many retirees mistakenly believe most of their assets need to be in income-producing assets such as bonds, CDs and money market accounts, said Michael D. Kresh, author of "You Can Afford to Retire."

"Very rarely is the income from any safe investments by itself enough to support retirement and cover inflation," Mr. Kresh said. "In times like now when interest rates are very low, the pressure is even greater.

"Retirees need to realize their investments need to work for them their entire life, not just to the day they retire," he said. "The only way an investor or retiree will have any chance of generating enough retirement income is to remember they must be investors until the day they die."

Most investment advisers say the magic number for retirement withdrawals is 4 percent.

That's how much of their retirement nest egg retirees can safely spend each year with a reasonable degree of making their money last a lifetime. A 3 percent annual withdrawal rate is even safer.

Annuities could be another option for guaranteed lifetime income. According to WebAnnuities, it would cost a 65-year-old man $100,000 to guarantee a monthly annuity payment of $675 with no payments to beneficiaries.

Sri Reddy, head of retirement income strategy for ING in Windsor, Conn., said that although retirees count on living off the interest from their investments, spending principle is definitely an option to consider. He also suggests they consider fixed annuities and U.S. Treasury inflation-protected bonds and IBonds. The latter two choices are guaranteed by the government and will keep up with inflation.

"People have to remember they may be in retirement for 20 years or more," Mr. Reddy said. "So, they can't think like short-term investors.

"Don't cash out your stocks and move all of it to money market accounts. When investors get scared and make short-term decision, they miss long-term growth opportunities."

A recent retirement survey conducted by InvestmentNews, a weekly newspaper for investment advisers, based in New York, showed 63 percent of Americans thought about retirement frequently and 32 percent believed that they would need between $1 million and $2 million for retirement even though they're not on track to achieve those goals.

"People are going to have to tighten their belts. That's a reality," said Jim Pavia, InvestmentNews editor. "They may not be able to take that vacation this year. You have to make decisions on what you can and cannot handle."

One of the biggest obstacles to retirement planning comes when people use retirement funds for current consumption. Up to 20 percent of Americans are dipping into their 401(k) savings to pay bills, he said.

"If you are in your late 50s or 60s, and you're dipping into your 401(k) savings to pay current bills, that is financial suicide," Mr. Pavia said. "I can't even imagine 30-year-olds doing that."

Gail MarksJarvis, a financial columnist for the Chicago Tribune and author of "Saving For Retirement Without Living Like A Pauper Or Winning the Lottery," said her book title comes from research that found that only 26 percent of people thought they could ever save $200,000 and 21 percent thought they'd be more likely to win the lottery to acquire that amount.

She said a slow economy presented a more challenging situation for people in retirement or about to retire, and what is considered prudent is for them to have three to five years of living expenses in money market funds, CDs or U.S. Treasury bonds.

"That way, if there is a bear market, you don't have to touch any stocks until they have a chance to heal," Ms. MarksJarvis said, adding that retirees also should have a portion of their assets in bonds paying interest to offset living expenses.

"Most seniors never calculate what they need to live on and whether they are invested in a way that will give them the money they need," she said. "A rule of thumb is they should never take more than 4 percent of their savings out in the first year of retirement.

"Numerous studies show if you take more than 4 percent out your first year, you risk running out of money. Bear markets like the one we are in will happen and you have to factor that in."