Today, I want to put aside my usual coverage of daily market activity to ask an uncomfortable question: Are you afraid of running out of money in retirement? If you answered “yes,” you’re not alone.

Millions of Americans are terrified of outliving their savings. Our country faces a worsening retirement crisis.

Folk singer Joan Baez (remember her?) once said: “Action is the antidote to despair.” Below, I outline specific actions you can take now, to ward off retirement despair.

Financial insecurity on the rise…

The pandemic clobbered household finances throughout the country, and the soaring inflation that followed has compounded the pain.

Despite the fact that consumer spending has remained high and that unemployment has remained relatively low, Americans are feeling concerned about their financial security.

In fact, a recent Statista Consumer Insights survey showed that when it comes to American worries, financial concerns top the list.

Take a look:

You will find more infographics at Statista

When hunger stalks the elderly…

Separately, a Federal Reserve report shows that although 75% of non-retired American adults have at least some retirement savings, about 25% do not have any.

Let that sink in: one-fourth of working adults have saved zilch for retirement. Stories abound of seniors on Social Security eating cat food to survive.

In your supposed “golden” years, Purina Friskies shouldn’t be on the menu. To lay the foundation of a secure (and well-fed) retirement, start with this five-step checklist:

1) Set a Retirement Date

It’s important to have a specific date in mind for when you plan to retire. This should be based on multiple factors.

If you enjoy your job, would you prefer to keep working (and saving) a little longer? It’s tough to get back into the working world once you’ve left it behind.

Are you slated to get a defined-benefit pension from your job? Are you fully vested? If so, you may not need to make significant changes in your investments.

When are you eligible for full Social Security benefits? If you start to collect your benefits earlier, your monthly payments will always be lower than if you had waited.

Make an assessment of your future spending needs. Will you sell your home and move to a lower-cost area? What are the tax consequences of this?

2) Create a Withdrawal Plan

You should withdraw cash from taxable accounts first. Later on, focus on tax-deferred accounts such as traditional Individual Retirement Accounts (IRAs) and annuities.

Leave accounts with tax-free withdrawals for last. An example of such an account is the Roth IRA, which allows taxpayers, subject to certain income limits, to save for retirement while allowing the savings to grow tax-free. Taxes are paid on contributions, but withdrawals, subject to certain rules, are not taxed at all.

Early in your retirement, converting currently taxable assets to spending money makes sense because little or no additional tax likely will be due.

First, take dividend income and any mutual-fund distributions in cash instead of reinvesting them. You pay tax on these payouts even if you reinvest them, so this step won’t cost you anything.

Next, sell investments with no cost basis or the highest basis and therefore no or low taxable gain.

Assets with no cost basis include money funds and bank CDs as well as Treasury bills and various types of bonds held to maturity. Bond funds likely carry a high basis compared with your sale price, and therefore low tax liability.

Ideally, you’ll be more passive in taking long-term gains and more active in “harvesting” your tax losses.

3) Shield Inheritance

If you don’t take measures ahead of time, Uncle Sam will take a huge bite out of your inheritance via the capital gains tax.

One of the few ways to sidestep the capital gains tax is to make a gift of property to a charitable organization. When you do so, you may take a deduction based on the full fair market value of the property, rather than just its cost.

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The tax savings will largely depend on the amount of appreciation. You can reap greater income by investing these tax savings.

Popular charitable giving plans include the annuity trust, revocable trust, pooled income fund, gift annuity, and life estate agreement. Consult your tax accountant for details, to find the plan that’s precisely right for you. But do it now.

4) Don’t Under-weight Stocks and Over-weight Bonds

Investors should get more conservative as they get older, mainly because they have fewer working years in front of them. As you get closer to retirement, you should increase your portfolio’s bond weighting.

Read This Story: A Simple Plan for Building Wealth Later in Life

That said, it’s a common mistake to get too conservative. Bond yields fall as interest rates rise. In a rising rate environment, a large allocation to bonds may result in significant capital loss.

The following portfolio allocations generally make sense under current market conditions (see pie chart).

Tweak these percentages according to risk tolerance and stage of life. Your hedges sleeve should contain 5%-10% in precious metals, such as the traditional safe haven of gold.

5) Increase your exposure to dividend stocks

You don’t have to be an income investor to love dividend-paying stocks.

Dividend-payers are time-proven vehicles for long-term wealth building, but they’re also safe harbors in turbulent seas because companies with robust and rising dividends by definition boast the strongest fundamentals.

If a company has the low debt and healthy cash flow required to throw off juicy dividends, it follows that the balance sheet is intrinsically sound enough to sustain the firm through corrections.

But you need to pick the right dividend stocks, with dividends that are not only high but also sustainable. For our list of rock-solid dividend stocks that will generate steady income for years to come, click here.

John Persinos is the editorial director of Investing Daily.

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