More than half of individuals in drawdown are unaware that they can scale back or stop withdrawals, according to Zurich.
The provider had surveyed 2,000 individuals who had unlocked their savings since the introduction of pension freedoms in 2015.
It found that half (52 per cent) of over-55s taking an income in drawdown did not know they can reduce their withdrawals, and more than half (56 per cent) were unaware they can stop them, despite flexible income being a key perk of drawdown.
Due to this, Zurich warned individuals who are taking unsustainable levels of income, meaning their pots will run out in retirement, could become exposed if stock markets crash.
If shares tumble, investors risk falling into a trap known as pound-cost-ravaging, Zurich warned.
This is where, as stock prices drop, retirees are forced to sell more investments to achieve the same level of income, depleting their pension pot quicker, and reducing its future growth.
Alistair Wilson, Zurich’s head of retail platform strategy, said: "Drawdown gives people the flexibility to shift their income up or down as their spending needs change, or markets fluctuate, yet a staggering proportion of people are seemingly in the dark over the control they have.
"If investment returns come to a sudden halt, savers need to be prepared to step on the income brakes. People who are unaware they can slow down, or stop their withdrawals, could seriously damage their savings, and deplete their pots too soon."
Zurich also found a difference between those who had sought advice and those who hadn't.
Only 35 per cent of non-advised retirees understood they could reduce their drawdown income, compared to 77 per cent of people who had an adviser.
Meanwhile, 33 per cent of non-advised consumers were aware they could stop their drawdown income, versus 73 per cent of those speaking to an adviser.
Mr Wilson said: "Investors are making complex choices in drawdown without fully understanding how it works.
"There is a critical gap in consumer awareness, which could mean many of those who don’t have a relationship with a financial adviser face poorer outcomes in retirement.
"It’s crucial that people engage with their savings in drawdown, ideally with the help of a financial adviser."
Mr Wilson suggested that in the situation of a stock market crash, retirees should halt drawdown withdrawals stating that this leaves investments intact, giving them a better chance to recover when markets begin to rise.
According to research from the Association of British Insurers, published this month (June), about a third (34 per cent) of the 62,000 savers who accessed their pensions via drawdown for the first time last year didn’t take financial advice.
The ABI also found drawdown pots were getting larger.
At an average size of £120,000 this was the highest on record, while the proportion of customers reaching retirement with more than £250,000 also doubled in the space of just two years (to 11 per cent).