Recently, Mount Everest claimed 12 lives while sherpas guided climbers toward the summit. It marked the deadliest day in the mountain's history, and 2014 is already one of its deadliest years, even though the climbing season has just started. Historically, most people lose their lives on Everest during their descent, not their climb.
There are several risks associated with the descent. Fatigue is one of the biggest issues due to the long climb to the summit. Falling behind the guides during the initial descent can lead to poor decisions or quick movements at high elevations. Descending too quickly creates a condition where fluid builds in the lungs. Tragically, most deaths during descents occurr within 8,000 feet of the summit .
can use the descent of Everest as an analogy for working with clients. They need to pay careful attention to several aspects of the process — they need to be attentive guides. First, the initial parts of the de-accumulation of assets are most critical. Mistakes in the early years of changing to the income phase can produce serious ripples throughout retirement. Sequencing of returns plays a major role during these initial retirement years.
Second, clients tend to make quick decisions — usually because they haven't planned in the 5 to 10 years leading up to retirement
. We must work with clients to reposition their assets to preserve and protect them in the descent from working years to retirement. One of the largest fears for most Americans is the transition from accumulating assets to depleting them.
Finally, we have to pay attention to our clients throughout retirement. The landscape fluctuates with rapid changes in market performance. We must keep our clients' best interests in mind and recognize that they prefer a steady income.
Annuities provide steady, consistent income. They allow for the consistent disbursement of assets over a client's lifetime while averting one of their biggest fears — outliving their income. Taking away the risks of income early in retirement allows a planner to focus on longer-term asset growth to sustain inflation-protected income.