Watch Your Step

Investing for retirement is like mountain climbing and flying airplanes. Surprisingly, the riskiest part of the journey isn’t the climb. It’s the descent.


Austria, the central European country, is known for its mountainous landscape. Approximately 60% of the country is covered in mountains. For years, the Austrian Alpine Police collected and recorded data about mountain-climbing accidents. No one had bothered to mine the data for clues until an Austrian professor began slicing and dicing the statistics in 2016.


What the professor found was revealing.


Of the 5,368 accidents analyzed, approximately 75% of them occurred on the way down the mountain. The descent was more treacherous than the climb.


The professor concluded there were a number of factors that may have contributed to this phenomenon. For example, exhaustion from the climb up the mountain could have led to weaker muscles that gave out on the way down the mountain. Loose rocks may have created slipping hazards that were more difficult to recover from when climbers’ backs were to the mountain on the descent.


Whatever the reasons, the research was clear. Climbers need to be even more vigilant after they reach the peak.


Investing for retirement is similar. There are far more ways to make mistakes after reaching our retirement peak and beginning to draw down savings than there are creating those savings in the first place.


During our working years – when we are climbing the retirement mountain – the strategy is simple. Save as much as possible and invest aggressively to maximize returns. It doesn’t have to be any more complicated than that. The real trick during the accumulation years is maintaining discipline.


On the way down the retirement mountain, however, hazards abound. A lack of experience or focus can cause financial accidents that may be devastating. Withdrawing from the wrong account at the wrong time can snowball end-of-year taxes. Claiming Social Security at ill-advised times may leave tens of thousands of dollars on the table. Missing a required minimum distribution may lead to a 50% penalty.


The decisions are far more complicated on the way down the retirement mountain than they are on the way up.


The same is true in flying. Boeing, the aircraft manufacturer, tracks fatal commercial plane crashes. From 2008 through 2017, the company found that 19% of fatal crashes happened during the takeoff and climb, whereas 60% occurred during the descent and landing.

The way down is riskier.


As you approach retirement, it is vital to understand how the financial system works. You must be adept at navigating the retirement mountain.


To maximize the wealth you have accumulated, it is important to understand the tax code. It is important to understand how to coordinate the timing and sources of your income. It is important to draw from the right accounts in the right order. And it is important to understand the appropriate amount of investment risk in your portfolio.


That is not to say you can’t figure those things out. Most people can if they have the time and inclination. If not, it is wise to seek out expert assistance from friends, relatives, an accountant, or a financial advisor. The stakes are simply too high to figure it out on the fly.


Whether traversing a mountain or gearing up for a long retirement, you must be mindful of the hazards. Just knowing that the descent requires caution is a helpful first step. From there it is a matter of learning strategies and techniques to keep you – and your money – safe.


As the Austrian professor discovered, not all accidents on the way down the mountain are fatal. But twisted ankles and broken bones put a damper on the joy of summitting a mountain.


Retirement is no different. Be safe. Be vigilant. And enjoy the descent.

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