Rita and Richard are 71 and living retirement in the comfort they imagined—without a worry about the stock market.

In fact, their life is so pleasurable, they do not want me to reveal their last name because they feel a bit sheepish when they compare their lifestyle and peace of mind to their friends'.

"Every place we go socially, people are moaning and groaning about what they've lost in the stock market, and we just sit there quietly," Rita says. "I don't want to seem like we have it better than them."

At a time when severe stock market losses are forcing their friends to cancel trips and cut back on indulgences, Rita and Richard are planning to take their usual two-month trip to a Florida condo they will rent this winter. This year they visited friends in Seattle and relatives in California and Canada. Last year they went to England.

When weather permits, Richard plays golf twice a week and Rita gardens as a hobby — growing expensive wildflowers. On days when Rita spends too much time in her garden and doesn't feel like cooking, they have dinner at a restaurant with tablecloths. Richard doesn't like Denny's or fast food.

They have never been rich. Until they retired at 67, he headed a nonprofit organization and she taught home economics in small colleges. Each of them saved diligently in employee retirement plans while working.

Disciplined saving put them on the right track. But the reason I am telling their story is because of what they decided to do with their money when they retired in 1998.

Then the stock market was on a tear, and many seniors were caught up in the excitement of making 20 percent each year—oblivious to the damage a 40 percent drop in the stock market would inflict on retirement savings.

Now some retirees realize what's wrong with that approach: If you lose money in stocks during your working years, a regular paycheck keeps coming in and you can continue to build up some of the retirement savings you have lost in a bad stock market.

But in retirement, there is no new money coming in, so you can't replenish the nest egg. If a retiree needs to cover living expenses by selling a stock such as Cisco—which was once worth $70 and is now under $11—that guarantees never regaining the money that was anticipated on the retiree's last working day.

With the help of a financial planner, Rita and Richard designed their retirement in 1997 so they would be somewhat insulated from a lengthy stock market decline.

At that point, the couple had 85 percent of their retirement savings invested in stock mutual funds. They were inclined to continue to stay with the goose that laid the golden egg. Instead, St. Paul financial planner Marc Hadley advised them to leave 50 percent invested in their stock mutual funds and invest the other 50 percent in bonds.

The bonds now provide money for their living expenses. Their plan is to never touch the stock mutual funds when they are down in value.

This strategy, developed by St. Paul certified public accountant Roger Katzenmaier, is what has provided the couple peace of mind. Investors who want to consider it can use the software free at www.isgplanning.com.

"I feel like our income is even safer now than when we were working," says Rita.

Here's how it works:

As Rita and Richard planned their retirement for 1998, they and Hadley figured out their annual income needs for each year of retirement and made sure they wouldn't tap retirement savings so much that they'd deplete the money within 30 years.

Hadley calculated that inflation would force the cost of living up 3 percent a year and the couple would get Social Security in addition to their own savings.

Then Hadley created what's called a "bond ladder," which would cover their annual income needs for each of the next 10 years. In other words, he had the couple buy from a discount broker 10 different safe bonds—ranging from Treasury bonds to A-rated corporate bonds. The first bond matured—or came due—in 1999; the next 2000; the next 2001 and that will continue for each of the 10 years. Together the package of 10 bonds yields about 6 percent a year.

Rita and Richard derive their income from bonds in two ways—from the interest the entire 10-year bond package provides and from a bond that matures each year. So in the year 2000, as the stock market was falling, Rita and Richard didn't need to worry. Besides Social Security and bond interest, their income came from the $38,705 they pocketed when the bond for 2000 came due.

Also, early in 2000, Hadley started planning for the couple's income needs beyond the original 10-year bond ladder period. He had just the opportunity he needed.

Stocks had been climbing more than 20 percent annually for five years. Although Hadley couldn't be sure when the good times would end, he decided it was time for Rita and Richard to lock in some of their stock gains and extend the period in which their income would be guaranteed. They took enough money out of stock mutual funds to buy two more bonds—one that would mature in 2009 and one for 2010.

So while their friends have worried about their incomes, Rita and Richard have been sure all their income needs will be covered through 2010—no matter what happens to the stock market.

This is the strategy that Katzenmaier calls "navigating through an investment storm."

The idea is that instead of planning to sell stocks when retirees need income, they sell them when stocks have climbed more than 10 percent a year for some time—the historical average. There is no way investors can guess when those periods will come.

Katzenmaier doesn't want retirees to leave the opportunities to chance. By holding 10 years of bonds, retirees provide themselves a cushion to ride out the storm and to sell stocks only when it's profitable.

Hadley notes the system isn't perfect. The stock market has been declining for more than two years, and as it has gone down Rita and Richard's stock mutual funds have fallen about 20 percent.

Rita says she realizes that if the losses continue, she and Richard will have to cut back on some of their pleasures later in retirement because the stock portfolio won't provide the money they anticipated. Still, she says, the income levels and modest investment returns Hadley calculated before she and Richard retired give her the comfort of knowing how much leeway they have to lose money and still do all right.