At least two older people I know live entirely off the income they get from ultra-conservative investments such as Treasury bills. With long-term Treasury notes paying 2-4%, they're watching their monthly incomes plummet. To pay their bills, they have to periodically sell off some of their principal, a scary thing they hesitate to do, knowing they'll have even less to live off of."One reason they're anxious is because people are living a lot longer," says Mark Hoffman, CEO of LifeYield. "You might think that's a good thing, but with that comes the knowledge that you have to make what you have last longer. The financial service industry has come to that realization."

What's needed are ways to stretch income farther and to wisely handle "decumulation." (Although the word "decumulation" isn't in my dictionary, it's used to refer to the process of drawing down on investments to boost income, as opposed to accumulation, investing and saving for retirement.) "The financial services industry is responding by building products for this segment that are equity based -- the only way you can grow your assets in a time of decumulation is by having some of your money invested in a more risky asset such as equities, mutual funds or an exchange traded fund. Versus Treasuries, which probably aren't making it above inflation right now." However, this is only a partial solution. "Things become more complex in the management of those assets, particularly when you're setting up an optimal income distribution over a period of, say, 30 years for a retired couple," says Hoffman. Different tax rules affect short- and long-term gains. "If the retiree is 70 ¼ and has minimal distribution requirements, you want to make sure you choose the right assets and follow those tax rules as well, because if you don't, you get taxed at the 50% rate," Hoffman says.

Hoffman and two partners, Paul Samuelson and Michael Benedek, launched a new company this month, LifeYield, that offers software to help financial advisors guide their not-quite-ready-to-retire clients - and there are about 77 million Baby Boomers who loosely fit in this category. (Prior to LifeYield, Hoffman, Samuelson, and Benedek founded and managed Upstream Technologies, a provider of asset management technology that my colleague Ivy Schmerken wrote about in February 2005; Upstream was acquired by CheckFree in 2007.)

LifeYield's software has three main components. First is a dashboard that tells a financial advisor which of his accounts need to raise cash so the client will have enough money to pay her bills. The second part of the platform is a "cash harvester" that looks at all of a household's accounts (taxable or tax-free), applicable tax rates, and minimum distribution requirements and consults an actuarial table to determine the best approaches to decumulation. The third part of the product is a payment modeler that allows wealth advisors to review a client's assets with the client and create "what if" scenarios and their effects on income distributions, taxes and fees - for instance, what if the client makes a large withdrawal to buy a boat or to help his grandchildren through college. LifeYield is hosting this software as a service priced around $1,000 per month per advisor, regardless of the number of accounts or amount of assets he manages. "Our research shows that wealth advisors spend one to three hours doing each client income distribution," Hoffman says. "A lot of advisors can't afford to do this manually."