"In the five years prior to actually retiring, it's important that somebody go through some sort of coaching or counseling to decide what they want their retirement to be like," says Gala Gorman, a wealth manager with Five Points Financial in Franklin, Tenn. "It's easy to say, well, I can live on $8,000 a month, but if you've been a type A personality, you're bored stiff. Who cares if you've got $8,000 coming in? You're looking for something to do, and that takes some capital infusion-and out the window goes your financial plan."

Ken Shapiro, a planner with Shapiro Financial Security Group Inc. in Hazlet, N.J., recalls a retired client who didn't want to own a house ever again, and who locked her money in an annuity ... and then found that perfect cottage she wanted while driving down the road. "The market had gone through the downturn, and she had surrender charges and fees for the annuity," he says. "It cost her a pretty penny as well as the lost principal."

Probably the biggest mistake is that many have not girded themselves for life-altering events. The prescription, say planners? Defer major decisions (huge trips, or a new business) if you don't have a plan, and spend the first few years figuring out what retirement is about. To many planners, this is more important than dramatic portfolio changes-figuring out client goals and tweaking the financial picture accordingly.

Saving Too Much?

Some academics have recently taken the counterintuitive argument that people are saving too much, mainly at the behest of the financial services industry. Shapiro questions this logic, however, saying that most people need the extra cushion because they are underinsured and face higher medical and college costs. What's more, they're managing their own money more in this post-defined-benefit world, sometimes to their detriment.

"People are putting so much away on a tax-deferred basis that they have no liquidity," says Shapiro, "And every time they need money to buy a car or make some type of acquisition or take care of an emergency, then they're having to take money out of whatever retirement vehicle they have. And every time they do that, there is a tax consequence increasing the cost of that transaction."

For many advisors, the switch from offense to defense-from accumulation to protection-is why they prefer laddered bond portfolios, which allow clients to draw income. Shapiro, who used to work in banking, says that for him the key is asset-liability matching, and laddered bonds allow him and others to fund client needs in the first five years so that he knows those funds will be there no matter what the market does. By segregating these assets, he says, clients become more comfortable with the risk of longer-term investments.

"I tried to use that in designing portfolios, so what clients were not going to need for 15 years we could invest more aggressively," he says. "I say we're going to carve out $50,000 or $100,000 or whatever the case may be for that portfolio and make that purely a fixed-income laddered maturity instead of funding it from capital gains."

Another thing that's important to do, says Shapiro, is to make sure that the clients know it is OK to hold liabilities as long as assets are growing faster. This is a key argument for a retiree who feels an emotional need to be free of debt.

"If you have a mortgage at 6% and you're earning 7% on your portfolio, then every year your net worth is going up 1% and you're making money off someone else's money," he says. "If you had no debt, you wouldn't have that 6% cost, but you also wouldn't have the funds with a 7% growth."

Not Enough? Now What?

If the clients haven't saved enough, the answers are less clear cut. Sometimes it means that they will have to drastically reduce expenses, and in some cases it may mean putting off retirement.