The leap from paycheck to payout can be a scary one for boomers who are starting retirement. However, it need not be a free fall, but rather, with the right preparation, a smooth transition, say financial planners.

This is “probably the most pivotal time in their financial lives,” notes Bradley Bofford, managing partner with Financial Principles, Fairfield, N.J. “We remind clients that they worked hard their whole life anticipating the day they could finally retire. Well, that day has arrived! But with it comes the realization that they’ll need to carefully manage their assets so their retirement savings will last.”

In order to make those savings last, Bofford recommends some ways he says will ensure the client’s money is available throughout retirement.

These suggestions include a regular portfolio review to make sure holdings are suitable, careful spending, taking required minimum distributions, exploring all Social Security options, leveraging life insurance, and considering long term care options. (See sidebar.)

Don Martin, a certified financial planner with Mayflower Capital, Los Altos, Calif., keeps a couple of things in mind when planning for his clients’ retirement income.

Martin says he believes a withdrawal rate of roughly 4% is safe for clients. This rate, he continues, is a consensus among financial planners, and annuity companies and includes assumptions such as: The dollar amount withdrawn annually keeps up with CPI, a reinvestment of excess income in the portfolio is “banked” for “years when the market has poor returns,” and bonds held in the portfolio are quality securities and have maturities of under 5 years to guard against sudden interest rate spikes.

Additionally, middle income clients with a modest net worth should seriously consider purchasing an immediate annuity at retirement to protect against longevity risk, Martin asserts. The annuity should have a Treasury inflation protection feature or, if fixed, Martin says, it should have interest rate terms that renew every several years to protect against inflation.

The client should not put all funds into an annuity but rather, according to Martin, get a commercial annuity plus Social Security benefits that “total enough to just barely survive so that if equity investments fail then the client at least can survive.”

Asset allocation and portfolio rebalancing are ways to ensure long term portfolio performance and future streams of income, according to Anthony Benante, a wealth management principal with Baron Financial Group, Fair Lawn, N.J.

Benante says his firm tries to maintain a cash cushion that will meet a client’s needs for 12-18 months depending on individual client circumstances. The cash cushion allows a client to withdraw money without having to make a decision on whether or not to sell securities in the portfolio. The cushion is replenished through interest and dividends from the portfolio, he continues. Additional cash, Benante adds, can be raised when the portfolio is rebalanced on a quarterly basis.

This system, Benante says, allows a client to remain invested in appropriate asset classes and at appropriate percentages based on their risk/return levels.

When considering the withdrawal rates appropriate for a client, an advisor needs to consider how scientific advances have extended mortality expectations, says Donald Patrick, a certified financial planner and managing director with Integrated Financial Group, Atlanta. For instance, for a 65-year old couple, his firm is using 95 as the wife’s life span, he adds.

In addition to life span, Patrick says that for a 30-year retirement, his firm uses different stress tests, including looking at a how a portfolio performed during different historical periods including the Great Depression and World War II and how it would perform during a period of hyper inflation.

Patrick says that if the client portfolio actually declines, then spending is frozen during the period of decline.

In lieu of that portfolio, he continues, laddered bonds and certificates of deposit are used, segmented in 5-year time periods as well as 5-year income annuities, depending on which is the best paying investment choice. For any time frame through year 10, the alternate source of funds is largely bonds and CDs, but for a time horizon of 11-15 years, some equity is added to the investment mix, he continues.

Patrick says using the freezing technique prevents a client from pulling too much out of a portfolio during the drawdown period, a financial timeframe he describes as “the most dangerous phase.”

He also notes some new guaranteed benefit riders on certain variable annuities that can help ensure income in retirement.