Retirement Bucket Strategy

Retirement Bucket Strategy

Running out of money in retirement ranks as one of the top worries of investors. The Bucket strategy uses a three-pronged approach to generating income before and during retirement. When using the bucket strategy you should have a “now”, “soon”, and “later” bucket. The now bucket is designed to cover living expenses and large emergency expenses that may arise in the first year or two of retirement. The soon bucket holds money that you may need sooner rather than later and typically is used from year 3 to 10. The later bucket is designed for long- term growth and the final phase of retirement. It should contain higher-growth, long-term investments, such as commodities, real estate, and hedge funds.

Pros:

• • There’s more predictability and offers a clearer picture of your retirement savings
  • You can tap into assets and still generate portfolio growth

Cons:

• • Estimates for retirement expenses must be accurate
  • It may be more challenging to maintain and manage

Breaking Down The Buckets

Bucket 1 -“Cash Bucket” [1-3 Years of cash equivalents.]

Purpose:

• • • To avoid sequence risk and to stabilize principal to meet spending requirements.
    • Used for everyday spending needs

Bucket 2 –“Income Bucket” [4-9 Years of Income Stability.]

Purpose:

• • • High-Quality income production with modest growth potential.
    • Used to replenish bucket 1

Bucket 3 – “Long Term Growth” [Long Term Investments > 10 years. ]

Purpose:

• • • Capture the real returns only available through stocks while minimizing losses during bear markets.

For information on planning and saving for retirement contact one of our team members to learn more.