In May 1953, Sir Edmund Hillary and Tenzing Norgay became the first to successfully climb Mt. Everest. Well, did you know that they might not have been the first to climb the world’s tallest mountain and make it to the summit? Most of us have not heard of George Mallory. He was believed to reach the summit in 1924, almost 29 years before Hillary and Norgay. Why do they receive the credit while Mallory is hardly ever mentioned? Because they made it back down the mountain and Mallory did not.

Our retirement life has two phases, accumulation (going up the mountain) and distribution (going down the mountain). Just like Mt. Everest, the distribution phase runs a much higher risk of failure than the accumulation phase. You see, there is something worse than dying— and that is running out of money before you run out of life.

1. Investing for income. Probably the most important planning you will do is income planning. Because when we lack income, we experience our highest levels of anxiety, pain and struggle. This is only compounded when we are retired and distributing our retirement savings. I highly suggest looking at lifetime income streams typically found in annuities. There are many different types of annuities—fixed, fixed indexed, variable, single premium immediate annuity, and others. When it comes to income investing, most retirees want to lean on the side of safety while attempting to maximize their returns without risking their principal. For this reason, I will highlight the fixed indexed annuity. Insurance companies, the original pension providers, have created a plan that gives a client the potential to grow principal safely and have an income floor of say 7% for future income on which we can base our lifetime income withdrawals. With the money used to purchase the annuity, even if you were to drain this account to zero, the payment established would continue for as long as you live. If you have funds in the account at your death, the money will go to your heirs. In addition to the fixed indexed annuity, I am a fan of putting enough money in an account with low to no risk to cover five years of income. This allows you to systematically draw down the account over a five-year period and then replenish the five-year account from the growth money. Using five-year income accounts along with annuities will allow payouts to grow to a sufficient level.

2. Investing for growth. The stock market will move in periods of expansion (bull) and periods of contraction (bear). There is no getting around it, so you must first determine your risk tolerance. Are you a conservative, moderate or aggressive investor? Or maybe somewhere in between? Depending on your risk tolerance, this will determine a time horizon for the money you put in your growth account. If you are conservative, for example, allowing the money a one- to three-year horizon will most likely be sufficient. Moderate risk will usually require at least a five-year horizon, and aggressive can be as many as eight to 10 years or more. Many retirees make the mistake of drawing income off accounts that fluctuate with the market, which can greatly increase your chances of running out of money. Growth accounts in the market are dependent on time to be successful— the more aggressive, the more time they need.

3. Investing for protection. Most of us realize that as we age, we should consider the probability of declining health and the ability to take care of ourselves without assistance. I am talking about long-term care. Most people are aware of traditional plans, those where you pay premiums for life yet may never use the plan. Well, insurance companies have become creative by developing hybrid life insurance plans with long-term care riders. Say you have $150,000 in a money-market account earmarked for emergencies, long-term care, or for any other surprise that may occur.. Say you take $75,000 and put it into the new hybrid plan. The plan has two components, long-term care and death benefit. Relative to age and health, the benefit will vary, but let us assume the plan gives you a $120,000 tax-free death benefit and a $300,000 long-term care benefit paid out over six years. That gives you $50,000 a year for care; if you don’t use it, the death benefit goes to your family. Most of us will live longer in retirement due to advancements in medicine, but our chances of needing care will go up as well. The threat of long-term care can increase your probability of running out of money.