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My dog and I like to watch the squirrels trying to get into our squirrel-proof bird feeder.

The ones still slipping off the domed plastic roof at this late date must be the ones that didn't bury enough acorns. It's painful to watch. I'm reminded of how difficult it is to squirrel away enough money for retirement.

It's not enough to wind up with what looks, on paper, to be plenty of money. We know that there is a "danger zone" for retirees who start taking an income from their retirement account that is not supported by enough gains. Worse yet is a situation where a downdraft in account values, like the one we have just experienced, is compounded by a gnawing away at the balance by the income stream we are spending.

The classic illustration of this problem can be found in Moshe Milevski's research. He uses the example of two actual balanced mutual funds that had the same average rate of return (7.8 percent) over 20 years from 1986 to 2006. However, one had several loss years early and made it back in the end. The other did fine initially and then lost money at the end. We're talking about differences like a 1988 gain of 38 percent for one while the other lost 14 percent that year.

If we had started with $100,000 and left it alone, our 7.8 percent average gain would have allowed both to accumulate to $370,000 over 20 years. However, if we are taking out the earnings each year, it makes a big difference as to whether the losses we bear take place early or late. In the fund that had early losses, we're out of money in just 14 years. With losses at the end, we still have $104,000 at the 20-year mark.

Some suggest having "buckets" of different asset types and taking early money from the cash bucket. The basic idea is to leave money in stocks to protect against inflation and to avoid the possibility of taking income from a plunging stock fund. This may sound reasonable, but it doesn't work very well in practice. What happens over the first seven years or so is that all the cash will be gone and the asset mix will then be concentrated in stocks. That's the last place it should be for someone well into retirement by that time.

Meanwhile, we have inflation and longevity to consider. A 65-year-old woman has a life expectancy of 86 (83 for a male.) Those reasonably certain to become octogenarians could buy an annuity that would guarantee a lifetime income, but here's the rub: At 4 percent inflation, an annuity paying $1,000 per month today will be paying the equivalent of $456 in 20 years. We might just as well have lost over half of our money. If this wasn't bad enough, longevity is increasing at a rate of three months per year. In 20 years, this could mean five more years of longevity.

When we consider financial challenges, coming to terms with the "danger zone" is one of the most difficult. The simple answer is to spend only the interest or dividends from investments except in years when the capital has appreciated more than the rate of inflation.

Then, start collecting Social Security as early as possible so as not to tap retirement accounts any more than necessary. Forget the Roth. Select stock investments for their dividend strength and consider combinations of bond funds that generate higher-interest income even though fluctuations in capital value will occur. If the interest is all we spend, those fluctuations won't matter.

We can force feed retirement accounts while we're still working by remembering that 100 percent of the first $22,000 of annual income can go to a 401(K) plan - $44,000 for older couples still working.

If we need a visual image to get inspired, think of those squirrels in the middle of winter trying desperately to get at that birdseed.

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