The hard part is coming down the mountain

By Stephen Kelley

All your working life you have been putting money away, building your retirement nest egg, funding Social Security, and maybe even a pension or two. That was the easy part. In the same way that descending a mountain presents far more difficulty to a climber than ascending, the spending phase is much more treacherous than the saving phase. All the same challenges that exist on the way up are still present, along with a host of additional challenges presented when going down. Fatigue, colder temperatures, ice, limited vision, thirst, hunger, nightfall, all are added to the challenges already facing the climber.

When saving, one usually has a pretty good idea of when the money will be needed, the amount of money to save to meet the target, etc. At the same time, taxes, inflation, fees, unexpected events, and market risk must all be managed. However, these threats are often softened by a steady employment income in addition to being younger, sharper, and more resilient. If necessary, one may even choose to work longer, should they be hit hard by any of these threats.

None of these threats disappear during the spending phase, and most are compounded by several additional risks. The most obvious and pressing of these new risks is the fact that you have shifted from filling up the nest egg to draining it. That means that all the other risks, such as having no idea how long you will live, taxes, inflation, fees, and market risk are a direct threat at all times.

Take for example, market risk. Assume you have a fund that sells for $100 a share and you need $1,000 a month from savings to survive. That means you must sell 10 shares a month to live. Now the market goes down by half, and here’s where this really become treacherous. To meet your budget, you must now sell 200 shares a month. Every month you must sell off twice as many shares as you budgeted for. Worse, once they are gone they are gone. That means when the market finally does go up, you will not have as many shares to go up with it.

Market risk compounds the impact of inflation, taxes, fees, etc. These factors don’t just reduce your ability to save, they directly attack the nest egg, reducing the amount of income you receive. These reductions are often abrupt and immediate, and once lost, there is very little opportunity to reacquire savings, since the employment income is gone. That means people who need more income are often required to take more risk, all while you become older, less resilient, and often carry the burden of advanced health problems.

It goes without saying choices in equipment are critical to the success of a climb. If you don’t have the right clothing, footwear, oxygen supplies, crampons, belay and rappel devices, safety lines, shelter, etc., an otherwise successful climb can turn into a tragedy. Further, the equipment for the ascent may differ for the descent.

For retirement planning the key to solving this problem is to shift the way you think about it. Einstein once said you can’t solve a problem using the same thinking you used to create it. This describes perfectly what you need to do. You must take your focus off the nest egg and put it on the income.

We love orange juice in my house. We especially love the fresh squeezed kind. So, we are on a constant quest to find the best tasting, juiciest oranges. We’ve tried them all. One thing we’ve learned is the size of the orange often has little to do with the amount of juice an orange produces. For example, we’ve found tiny little juice bombs you can practically insert a straw into, and giant, pulpy oranges that make you want a glass of water after eating them.

What’s my point? We have been sold on the notion that the only way to get a larger income stream in retirement is to maximize the size of our nest egg. And the most logical way to increase the size of our nest egg is to get aggressive in the market. This may be reasonable when you are saving, but it’s ludicrous when you are spending. Adding more risk is not an automatic multiplier of your assets. Adding more risk is, however, a multiplier of your likelihood of failure.

So, what is the answer? Focus on having the desired outcome drive your inputs rather than our traditional approach of allowing the inputs determine the outcome.┬áIf you keep your money in the market (input) while spending, you will necessarily have to spend less as a defense to running out of money in the future. If, on the other hand, you focus on your desired outcome, which in retirement planning is lifetime income, you will be likely to pick an approach that guarantees an income for the rest of your life, becoming free to spend, knowing it’s a permanent evergreen income stream designed to last for as long as you do.

Stephen Kelley is a recognized leader in retirement income planning. Located in Nashua, he serves Greater Boston and the New England areas. He is author of five books, including “Tell Me When You’re Going to Die,” which deals with the problem unknown lifespans create for retirement planning. It and his other books are available on He can be heard every weekend on the “Free to Retire” radio show on WCAP and WFEA, and he conducts planning workshops at his New England Adult Learning Center, located in Nashua. Initial consultations are always free. You can reach Steve at 603-881-8811 or at

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