IT'S 4 IN THE MORNING and you're wide awake, tossing and turning and not just because you overindulged in the cheese plate last night. Your mind is gnawing on questions about the future: Have I saved enough for retirement? Am I overexposed to the roller-coaster stock market? Am I going to have to downsize my living arrangements from beach house to beet farm?

This year, in a demographic milestone, the first of the baby boomers are cashing Social Security checks. And not surprisingly, a growing number of these midlifers are getting nervous about their future. During the past two decades, they've profited from two long booms, one in the housing market and one in the stock market. But now, as retirement looms, they're facing a shaky economy and a wobbly stock market not to mention a swarm of ominous advertisements from brokerages and banks eager to win their business. (Ad spending by 10 of the top providers of retirement-planning services has jumped 250 percent in the past three years.) Small wonder that some boomers have begun to hit the panic button. This past spring's annual poll by the Employee Benefit Research Institute found that only 18 percent of workers were "very confident" they'd be able to have a comfortable retirement, down from 27 percent in 2007 the biggest one-year drop in the survey's history.

For more SmartMoney Magazine features, turn to the August issue.

Some boomers are going to be fine, of course, and some aren't but overall, the perception seems worse than the reality. Several commentators, for example, argue that national statistics about "undersaving" don't reflect the growth in value of Americans' investments and other assets leaving many investors feeling more pessimistic than necessary. Craig Copeland, a senior researcher with the benefit research institute, estimates that even given the economy and recent investment losses, one in four boomers are actually in "really good shape" to retire, and half of them "could go either way," depending on everything from the state of the economy to their own financial decisions.

That's the half, of course, most likely to suffer those sleepless nights. But is their insomnia really justified? To answer that question we looked at three of the warnings that dominate the retirement-planning world right now. Understanding how they do and don't apply may help to put you in the driver's seat when it comes to making your retirement work.

Message:

You haven't saved enough

When a financial adviser urges a client to save more money for retirement, she may be doing him a favor, but she's helping herself, too in many cases, the more money she can get a client to invest, the more she can earn in commissions or fees. A growing chorus of critics say that these kinds of incentives are distorting the advice consumers get. One focus of their ire: online calculators that offer to come up with the "magic number" of dollars one needs to retire. Some of these tools base their advice on as few as five questions; Boston University economist Laurence Kotlikoff, author of Spend 'Til the End, a book that argues that some people are told to save four or five times too much, says such oversimplification "is really financial malpractice."

Perhaps a kinder way to put it is that these tools are very conservative. One example: Some popular calculators assume retirees' investments will earn only 1 percent per year above inflation even though large-company stocks have beaten inflation by nearly nine percentage points annually over the past 20 years. Other financial planners' rules of thumb are similarly skewed. One standard approach says that a couple needs 70 to 80 percent of their preretirement income to maintain their standard of living in retirement. In reality most couples' spending curve is much bumpier. Spending often soars right after retirement (the jet-set period) and drops precipitously after age 75 (the rocking-chair years). Some planners say the 70 percent figure doesn't make sense for other reasons: Retirees often face lower taxes, and most no longer have expenses that come with raising kids or holding down a job.

Kurt Ellenberger, a 45-year-old music professor in Lamont, Mich., heard from planners for years that he needed between $1 million and $2 million to retire comfortably. Since he expects to put a kid through college during his early 60s, he says he'd basically "given up" on having a great retirement. But his outlook changed after he found a software package that asked him hundreds of questions with an aim toward giving him a more detailed plan. It turned out he was actually oversaving: Among other things, he didn't fully understand how Social Security and investment gains would affect his retirement income. That gave Ellenberger the confidence to live a little more richly: When his wife, Rebecca, needed a car recently, he says they "bumped it up a level" and got her a used Mercedes.

Ultimately, since retirement can be as personal as a fingerprint, many experts say it's best to question your financial planner early to see if the assumptions going into her estimates match your reality. Generally speaking, the fewer questions your planner (or your software, or your online calculator) is asking, the less accurate the final outcome is likely to be.

Message:

You have to downsize

Even at the start of the most recent housing boom, much of America's wealth was tied up in real estate. Home equity represented almost 42 percent of household net worth in 2002, and that share may well have grown with the subsequent runup of home prices. So it's no wonder many people plan to use their homes as retirement piggy banks cashing out, buying smaller and living on the difference. And planners say that even the recent cratering of real estate values hasn't changed these assumptions. "There's almost a herd mentality surrounding downsizing," says Timothy Maurer, a financial planner in Lutherville, Md. Even if not financially necessary, he says, downsizing can be a way to cut back on expenses like maintenance costs and lower the property-tax bill.

But for cash-challenged retirees who'd rather not run off to a cabana in the Sunbelt, there are alternatives. Carolyn Walder, a financial planner in Alexandria, Va., says "land rich but money poor" clients can stay in desirable areas with so-called life estates, arrangements in which relatives or developers gain possession of a property when the homeowner dies. Walder says life estates allow parents to stay in the home for the rest of their lives in return for a lump sum or steady payments; the arrangement can also head off sibling disputes over inherited property when the parents pass away.

Others have funded outsize lifestyles by working part-time or shedding some assets. Patricia Nathan, a 65-year-old retired airline employee, stayed in her longtime McLean, Va., home by selling about a third of her backyard to a neighbor who'd built a mini manse on an adjoining lot. She says the $110,000 she made "was enough to make repairs so the house didn't crumble down around me." And because the McMansion owner ran a landscape business, Nathan got five years of yard work gratis.

Message:

Invest more conservatively

With the economy on the rocks, Joe Fine, a retired aluminum buyer in Boston, considered dumping much of his money into annuities when he stopped working full-time in January. The 68-year-old saw a $350,000 portion of his portfolio halved when the tech bubble burst. "Twenty years ago I was strong enough to make a comeback, but I'm not sure that's possible today," he says.

Fine isn't the only one entertaining such doubts: A recent survey from Bell Investment Advisors, a Northern California planning firm, found that one in four affluent retirees planned to change their investment strategy because of recession fears; within that group 70 percent hoped to move more money to conservative vehicles like money-market accounts or bonds. Annuities with their comforting monthly payments for life and a new wave of retirement-income mutual funds are also looking good to some people.

These more traditional options are designed to immunize investors from stock market losses. Put too much money in them, however, and you could also be immune to stock market rebounds. Every time the economy hits a rough patch, John Bacci's clients start asking him to do the financial equivalent of hiding their money under a mattress. But Bacci, an investment adviser in Linthicum, Md., has a ready answer. "You'd rather retire when the market stinks than when it's good," he says he tells clients. "There's a higher likelihood your portfolio's got nowhere to go but up." And the more years you hope to live in retirement, the more you'll need that kind of growth in your savings. Joe Fine eventually adopted that logic: He's now invested in a balanced portfolio of stock and bond funds, and cutting back slightly on his spending while he waits like all nervous retirees for a rebound.

Retirement Myths 101

Turns out there are numerous misconceptions about retirement, and many have little to do with money. Here are some big ones: WHEN TO RETIRE Most workers say they plan on retiring after they hit age 65. Reality: More than three-quarters cash out before reaching that age, and nearly a third do so before they're 55. Job stress or dizzying success inspires some to say adieu. Others cite health concerns. MOVING About 60 percent of boomers who want to relocate think they'll move out of state when they retire. Reality: They stay local, with more than 80 percent of retirees who bought homes in 2005 scooping up property in their home state, most within 100 miles of where they used to work. The draw: friends, family and a familiar environment. WORKING Three-quarters of today's workers say they plan to toil away for pay in retirement. Reality: They call it quits, with only about a quarter of retirees opting to take paid jobs. Experts say many underestimate health constraints and want freedom to travel.